The portion of net profit that a company keeps after paying dividends, accumulated in the balance sheet to fund growth, repay debt, or serve as a financial buffer.
Retained Profit (also called retained earnings, accumulated profit, or ploughed-back profit) represents the total net profit a company has earned since inception minus all dividends paid to shareholders. It appears in the equity section of the balance sheet under 'Reserves and Surplus.' Retained profit is the primary source of internal financing — it funds expansion, R&D, debt repayment, working capital, and acts as a cushion during downturns. The retention ratio (1 − dividend payout ratio) indicates what percentage of profit is retained. Young, high-growth companies typically retain 80–100% of profits, while mature companies may retain 30–50% and distribute the rest as dividends. Negative retained earnings (accumulated deficit) indicates the company has lost more money than it has earned over its lifetime.
Opening retained profit: ₹50,00,000. FY2025-26 net profit: ₹12,00,000. Dividend declared: ₹3,00,000. Closing retained profit: ₹50,00,000 + ₹12,00,000 − ₹3,00,000 = ₹59,00,000. This ₹59,00,000 appears in equity on the balance sheet and has been used to fund the company's growth over the years.
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Yes, they are the same concept with different names. 'Retained earnings' is more common in US/international accounting, while 'retained profit' is used in UK/Indian accounting. Both represent accumulated undistributed profits. In Indian financial statements, it appears under 'Reserves and Surplus' per Schedule III of Companies Act 2013.
Yes. Negative retained profit (accumulated deficit/loss) means the company has incurred total losses exceeding total profits since inception. This happens in startups, struggling companies, or after major write-offs. It doesn't mean no cash — a company can have cash reserves even with negative retained earnings if funded by equity/debt.
The cumulative net profits of a company that have been kept in the business rather than distributed as dividends to shareholders.
A portion of a company's earnings distributed to shareholders as a return on their investment, typically paid quarterly or annually.
A financial statement that summarizes a company's revenues, costs, and expenses over a specific period to show net profit or loss.
The residual interest in the assets of a business after deducting all its liabilities. Also called owner's equity, net worth, or shareholders' equity.
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