It is the portion of the profits of a business which has not been distributed to shareholders; instead, it is retained for investments and/or expansion purpose.

Retained earnings = PAT - Dividends

The percentage of net earnings not paid out as dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders' equity on the balance sheet.

Retained Earnings (RE)= Beginning year RE + Net Income - Dividend