Retained earnings are the portion of a company's profits that are not distributed to shareholders as dividends but are instead kept by the company. The amount of retained earnings is calculated by subtracting dividends paid to shareholders from a company's net income. For example, if a company has a net income of £1 million and pays out £200,000 in dividends, the company's retained earnings would be £800,000.
Retained earnings can be used by companies for various purposes. One common use is to reinvest in the business, such as by funding research and development or expanding operations. Retained earnings can also be used to pay off debts or acquire other companies. Companies that retain earnings instead of paying dividends may be seen as more stable and better positioned for long-term growth.
Retained earnings are an important financial metric that can be used to assess a company's financial health and growth potential. If a company has high retained earnings, it may indicate that the company is profitable and has a strong balance sheet. However, if a company has negative retained earnings or has consistently low levels of retained earnings, it may suggest that the company is struggling to generate profits or is not reinvesting in the business.
Overall, retained earnings are an essential component of a company's financial management and can be used to support long-term growth and stability.
Full company financial data and account filings are available through FullCircl's Customer Lifecycle Intelligence platform, including Retained Earnings. Visit https://fullcircl.com to find out more.