Past profit the company kept rather than paid out
Retained earnings are the profits earned so far minus what went out as dividends, accumulated inside the company. The money is not sitting in a vault: most of it has become plant, inventory or subsidiaries. A thick cushion helps a company survive downturns, but capital left idle drags on how efficiently the company uses it.
Paying $3bn of a 10bn net profit as dividends adds 7bn to retained earnings.
For learning, not investment advice. Decisions are your own.
StockFit · TrueNorthLabs Inc.