Retained Earnings

Retained Earnings is the portion of profits that a company has held back, rather than paid to shareholders as dividends. To find this number in a company’s financial statements, look under Shareholder’s Equity on the Balance Sheet.

Companies retain earnings for working capital, to pay bills, maintain, upgrade or buy assets or to pay off debt. Retained earnings can be negative due to accumulated losses. This can be a red flag for D&O underwriters as it means that the company will be dependent on debt or equity to fund operations.