Retained Earnings

Retained Earnings tells you how much of a company's profit is being kept inside the business instead of being handed out to the owners. First, let's define two terms. "Profit after tax" is the money a company has left over from its sales once it has paid all its costs and its taxes. "Dividends" are the portion of that profit the company chooses to pay out to its shareholders (the people who own a piece of the company) as a reward for investing.

To calculate it, you simply take the profit after tax and subtract the dividends paid out. Whatever is left is the retained earnings — the profit the company is holding onto.

Reading the result is straightforward: a high retained earnings figure means the company is keeping a lot of its profit, often to reinvest in growth like new equipment, projects, or hiring. A low (or negative) figure means most profit was paid out, or the company didn't make much profit to begin with. As a project manager, you might look at retained earnings to understand whether your organization has its own cash available to fund new projects internally, rather than needing to borrow money or raise it from investors.