In accounting terminology, the term Retained Earnings refers to the amount of money a company retains in order to reinvest in its primary business or to pay off debt. Retained Earnings are not paid as dividends and are classed as shareholders' equity.
For example, setting money aside as Retained Earnings can be extremely beneficial to a company, and they are calculated by subtracting dividends from the net income. The Retained Earnings are usually listed in the shareholders’ equity section of the Balance Sheet. Retained Earnings are most often used to improve the company, although they can also be disbursed and paid out later as a dividend. Retained Earnings are also frequently used in the retirement of debt or in the repurchase of the company’s own stock. Many companies appropriate Retained Earnings and use the proceeds for specific purposes. Nevertheless, just because a company has Retained Earnings does not mean that such earnings are being held as cash.