Retained Earnings Calculator
Calculate retained earnings, dividend distribution, and analyze company reinvestment capacity
Calculate Retained Earnings
Company's net income after all expenses and taxes
Percentage of net income distributed as dividends (0-100%)
Number of outstanding shares for per-share calculations
Please enter net income to calculate retained earnings and dividend distribution.
Example: Company Alpha
Scenario
Company: Company Alpha
Net income: $1,000,000
Dividend payout ratio: 30%
Shares outstanding: 500,000
Calculation
Dividends = $1,000,000 × 30% = $300,000
Retained Earnings = $1,000,000 - $300,000 = $700,000
Retention Ratio = 100% - 30% = 70%
RE per Share = $700,000 ÷ 500,000 = $1.40
Growth Potential: High (70% retention rate)
Retention Ratio Benchmarks
Strategic Considerations
Growth Companies: Higher retention ratios for rapid expansion
Mature Companies: Balanced dividend and retention policies
Income Investors: Prefer higher dividend payout ratios
Reinvestment Quality: Ensure profitable growth opportunities exist
Understanding Retained Earnings
What are Retained Earnings?
Retained earnings represent the portion of net income that a company keeps for reinvestment rather than distributing to shareholders as dividends. This metric indicates a company's ability to fund growth internally and build long-term value.
Why Analyze Retained Earnings?
- •Measure company's reinvestment capacity and growth potential
- •Evaluate management's capital allocation decisions
- •Assess financial health and sustainability
- •Compare dividend vs. growth strategies
Calculation Formula
Retained Earnings = Net Income - Dividends
Dividends = Net Income × Payout Ratio
Retention Ratio = 100% - Payout Ratio
RE per Share = Retained Earnings ÷ Shares Outstanding
Strategic Implications
- High Retention: Growth-focused, reinvestment priority
- Balanced Retention: Sustainable growth with dividends
- Low Retention: Income-focused, mature business model
- Negative Earnings: Financial stress, potential issues
Note: Consider growth opportunities and shareholder preferences when evaluating retention strategies.