Retained Earnings explained

What is the meaning of the term retained earnings? Where do retained earnings show up in the financial statements? What makes retained earnings go up or down?

⏱️TIMESTAMPS⏱️
00:00 Introduction to retained earnings
00:28 Retained earnings definition
00:43 Retained earnings on the balance sheet
01:53 Reinvested earnings example
04:04 Retained earnings example
05:08 Accumulated deficit

In this video we walk through the definition of retained earnings, analyze two real-life examples of well-known companies to understand how retained earnings get accounted for, and provide bonus tips above and beyond what other videos and textbooks would give you on things you should know about retained earnings.

Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!

[Remrie]

Kudos for explaining why retained earnings are listed as liabilities even though it would appear as an asset.

[SuperAussm]

Thata awkward moment when a 6 minute video teaches me more then a MBA class... very sad. But good for you.

[ps]

I love your videos - both the content and the clarity of the concepts presented. Thank you for taking the time to spread the knowledge !

[amaankhan]

tum bohot acha kaam karta hai finance bhai ! mere ko tumko thank you bolne ka hai !!!

[yosmuc]

Amazing explanation! Thank you. I was wondering (in the case of Apple and any other company) how do we find the cash balance in the statements. Apple is said to have more than $250B in cash balance. I have looked at the recent statements and I am not sure what items to build / calculate together in order to reach a company's cash balance. I believe the place to find them is under Assets of the Balance Sheet but Total Cash is $74B. I will be very thankful for your guidance. Thanks again :)

[LordBeerus]

Legendary level explanation.. Awesome awesome!!! Thank you so much!!!!

[funubergames]

Great and thorough explanation of retained earnings!

[nicolasrivero]

FANTASTIC! jaja really enjoying financials.

[PoGoHopxl]

thank you so much! this def helps in studying for my final! :D

[tarunkumarreddysingampalli]

What a learning I almost got all my doubts clarify

[Intothemarket]

Thank you so much for sharing such useful data! Greatly appreciated

[aymansayed]

Wow... amazing presentation, absolutely amazing, God bless you

[hydeq-nachos]

I think a much better analogy of income statement vs balance sheet is with the movie analogy that you started...income is like a movie from start to finish which takes a period of time to watch a movie...where as the balance sheet is a scene in the movie by pressing the pause button the scene is frozen...its more logical that way movie and scenes go together like peas always in pods...

[kimcallahan]

Very helpful! I have been struggling with understanding this account in my class.

[pratikyadav]

Nice explanation because now my doubts are cleared by watching this it's CBSE SYLLABUS india which comes under business studies subject

[FlyBushLive]

So the retained earnings is money that’s just sitting waiting to be used for whatever the company Chooses in the future ? Or does it represent money that has been Spent already on purchasing more assets or reducing liabilities?

[natcatyzf]

To retain means to keep and earnings means profit. To close the years income statement, you label unused profit as retained earning to use this funds for expenses in the new year. The opposite of retained earnings is an Accumulated Deficit.

[weefella]

Hey Philip - a question on this - how does the changing share price impact Stockholders Equity over time? Also, how can I calculate what share price Apple paid to buyback the shares from the example?

[dooham]

I have a question concerning share repurchasing. When a company repurchases shares over the issuance price, why is the excess amount debited from retained earnings? (I understand that they take the amount first from contributed surplus then retained earnings). When the opposite happens (i.e. repurchase price is below the issuance), it is credited to contributed surplus and not retained earnings. Thank you!

[dolevmazker]

interesting video, Helped me a lot.

i would like to ask you -

If i want to value a company for whether it can hold out a crisis(like the corona virus), then would would i look at retained earnings as a measure if a company is liquid enough for a period,
or would i need to see a different measure in the financial statement.

What I'm looking to see is a accounting measure or financial ratio that i can use to see if a company has enough cash to sustain a period of decline.

I'm sorry if i don't make sense, i am only 5 months in my progress of learning accounting principles and valuation