The formula for retained earnings is net income in the period plus existing retained earnings less dividend payments. For example, if a company made a profit of $587,100 and its prior period retained earnings balance was $1,456,789, its new retained earnings balance is $2,043,889.
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What is 'Stockholders' Equity'. Stockholders' equity is the portion of the balance sheet that represents the capital received from investors in exchange for stock (paid-in capital), donated capital and retained earnings. Stockholders' equity represents the equity stake currently held on the books by a firm's equity investors.
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Retained Earnings and Dividends. The ratio of how much money a company pays in dividend vs. how much it decides to keep in retained earnings is of importance to investors. For example, investors who value dividends would obviously like to see a high dividend payout ratio.
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Dividends are payments companies make to their stockholders. These must be made from earnings. Since we record accumulated earnings in the RE account, all dividends must come out of that account. There are several types of dividends, but they all must come from Retained Earnings.
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Loading the player... Stockholders' equity is the portion of the balance sheet that represents the capital received from investors in exchange for stock (paid-in capital), donated capital and retained earnings. Stockholders' equity represents the equity stake currently held on the books by a firm's equity investors.
http://www.investopedia.com/terms/s/stockholdersequity.asp
What are 'Retained Earnings'. Retained earnings refer to the percentage of net earnings not paid out as dividends, but retained by the company to be reinvested in its core business, or to pay debt. It is recorded under shareholders' equity on the balance sheet. The formula calculates retained earnings by adding net income to, or subtracting any net losses from, beginning retained earnings, and subtracting any dividends paid to shareholders. Next Up.
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Retained earnings resides at the bottom of the balance sheet, while net income is shown on the income statement. Net income represents the firm's profits only for the period designated on the financial statement. As each period ends, these profits are added to the cumulative retained earnings figure on the balance sheet.
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Retained earnings are a company's net income from operations and other business activities, available to stockholders and retained by the company as additional equity capital. Retained earnings are thus part of stockholders' equity.
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A company keeps retained earnings for itself. The retained earnings account on the balance sheet represents the amount of money a company keeps for itself instead of paying it out to shareholders as dividends. Net income and dividends are the items that make retained earnings go up or down. Losses and dividend payments reduce retained earnings, while profits increase retained earnings.
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At the end of the fiscal year, all Revenue and Expense accounts are closed to Income Summary, and that account is closed to Retained Earnings. Profits increase RE; losses will decrease RE. So the RE account might go up or down from year to year, depending on whether the company had a profit or loss that year. The changes in the RE account are called Changes in Retained Earnings and are presented in the financial statements. This information can be included in the Income Statement, in the Balance Sheet, or in a separate statement called the Statement of Changes in Retained Earnings.
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what makes up retained earnings
Net income in the period plus existing retained earnings less dividend payments makes the retained earnings. Retained earnings is made up of net income in the period plus existing retained earnings less dividend payments. The retained earnings are made up as net income in the period plus existing retained earnings less dividend payments.