Retained Earnings

Retained Earnings are on of three categories of owner's equity. Retained earnings represent the money or earned capital that the company has realized through profitable operations.  Since stockholders assume the greatest risk when investing in a company due to unprofitable operations, they also share in the rewards generated during a profitable fiscal year.

Any portion of net income that is not distributed to common or preferred stockholders and is held by the company for future use is placed into retained earnings.  The amount of retained earnings held by a company can be found on owner's equity section of the balance sheet.