Retained Earnings

Retained earnings refer to the portion of a company’s net profits that is not distributed as dividends to shareholders but is instead reinvested in the business. These earnings are used to finance expansion, debt repayment, research and development, or other operational needs, helping the company grow without relying on external funding. Management’s decision on how much profit to retain versus distribute as dividends directly affects the company’s growth potential, financial stability, and shareholder value. Example: If a company earns ₹10 crore in profit and distributes ₹4 crore as dividends, the remaining ₹6 crore becomes retained earnings, which may be used to open new branches or invest in new technology