Dividends paid to shareholders are a cash outflow. The difference between a firm’s net income and the amount it spends on dividends is referred to as the firm’s retained earnings for that period.Retained earnings is typically used for reinvesting in the business, paying down debt, or saving for future use. Its balance is a component of shareholders' equity and can be found in balance sheet equity sections.
Learn Retained Earnings with interactive examples and practice exercises in our Income Statement module.
This interactive learning module helps you understand Retained Earnings through hands-on practice and real-world examples.