Retained Earnings
Retained Earnings is on the Balance Sheet and pertains to the portion of the company’s Net Income that is not distributed to shareholders as dividends, but is instead kept within the company to be reinvested or used for other purposes.
Retained Earnings is a cumulative metric that is calculated with the below formula:
Retained Earnings = Beginning Retained Earnings + Net Income - Dividends Paid
In the room
Retained earnings is the link that closes the three-statement loop — net income flows here, which is what keeps the balance sheet balanced. If your balance sheet doesn't balance in a modeling test, this is the first place to look.