Retained Earnings

The cumulative profit that a company has kept in the business rather than distributed as dividends, representing the business's reinvested earnings over time.

Retained earnings fund future growth without external financing. They also signal financial health to banks and investors, showing your business is profitable and self-sustaining.

A company earns £80,000 net profit in its first year and pays out £30,000 as dividends. The remaining £50,000 sits as retained earnings on the balance sheet.