Retained Earnings (RE)

Net working capital (NWC) is the profit money that the company chooses to retain instead of distributing it to its owners (these payments to owners are called dividends). This reserve increases year after year and is used to finance growth or repay debts.

Brief

Retained earnings (REE): the portion of profits that the company retains instead of distributing;
These payments to the owners are called dividends; what is not paid out remains in the company;
This reserve accumulates on the balance sheet (the company's financial snapshot), year after year.
It is used to finance growth, equipment, or debt repayment.

Why does this matter?

It's a bit like a company savings plan: each year, the company sets aside a portion of its profits for later use. For example, if your company makes $80,000 in after-tax profit and distributes $20,000 to its shareholders (dividends), the remaining $60,000 is added to retained earnings. A healthy reserve reassures lenders and gives you room to invest. It also influences your decision between paying yourself a salary or a dividend. Bankeo will connect you with a certified accountant/CPA free of charge to help you manage this reserve, and we'll be there to support you every step of the way.

Frequently asked questions

What exactly are undistributed profits?

This is the profit money that your company decides to keep rather than distribute to its owners. This reserve accumulates over the years and can be used for investment or to repay debts.

Where can we see the BNRs?

In the balance sheet (a snapshot of what the company owns and owes), in the section belonging to the owners, these represent the profits accumulated since the company's creation, minus what has been paid out as dividends.

Should the profits be kept or paid out to oneself?

It depends on your needs and your tax situation: it's a real calculation. Bankeo will connect you with a verified accountant/CPA free of charge, who will advise you, often within 48 hours, and we'll stay by your side.