body {
font-family: 'Segoe UI', Tahoma, Geneva, Verdana, sans-serif;
line-height: 1.6;
color: #333;
background-color: #f4f7f6;
margin: 0;
padding: 20px;
}
.calc-container {
max-width: 800px;
margin: 40px auto;
background-color: #ffffff;
padding: 30px;
border-radius: 8px;
box-shadow: 0 4px 15px rgba(0, 0, 0, 0.1);
}
h1, h2 {
color: #004a99;
text-align: center;
margin-bottom: 20px;
}
.input-group {
margin-bottom: 20px;
padding: 15px;
border: 1px solid #e0e0e0;
border-radius: 5px;
background-color: #f8f9fa;
}
.input-group label {
display: block;
margin-bottom: 8px;
font-weight: bold;
color: #004a99;
}
.input-group input[type="number"] {
width: calc(100% – 20px);
padding: 10px;
border: 1px solid #ccc;
border-radius: 4px;
font-size: 1em;
box-sizing: border-box; /* Include padding and border in the element's total width and height */
}
button {
display: block;
width: 100%;
padding: 12px 20px;
background-color: #004a99;
color: white;
border: none;
border-radius: 5px;
font-size: 1.1em;
cursor: pointer;
transition: background-color 0.3s ease;
margin-top: 10px;
}
button:hover {
background-color: #003366;
}
.result-container {
margin-top: 30px;
padding: 20px;
border-top: 2px solid #004a99;
}
#retainedEarningsResult {
font-size: 1.8em;
font-weight: bold;
color: #28a745;
text-align: center;
background-color: #e9f5e9;
padding: 15px;
border-radius: 5px;
}
.article-content {
margin-top: 40px;
padding: 20px;
background-color: #fff;
border-radius: 8px;
box-shadow: 0 2px 10px rgba(0, 0, 0, 0.05);
}
.article-content h2 {
color: #004a99;
text-align: left;
margin-bottom: 15px;
}
.article-content p, .article-content ul, .article-content li {
color: #555;
margin-bottom: 15px;
}
.article-content li {
margin-left: 20px;
}
strong {
color: #004a99;
}
/* Responsive adjustments */
@media (max-width: 600px) {
.calc-container {
padding: 20px;
}
h1 {
font-size: 1.8em;
}
button {
font-size: 1em;
}
#retainedEarningsResult {
font-size: 1.5em;
}
}
Understanding Retained Earnings
Retained earnings represent the cumulative net income of a company that has not been distributed to shareholders as dividends. It's essentially the portion of a business's profits that are kept and reinvested back into the company. This figure is a crucial component of a company's balance sheet and provides insight into its financial health, growth potential, and dividend policy.
Why are Retained Earnings Important?
- Reinvestment: Companies use retained earnings to fund operations, invest in new projects, acquire assets, pay down debt, and finance research and development, all of which can drive future growth.
- Financial Strength: A healthy and growing retained earnings balance can indicate a profitable and financially stable company.
- Dividend Policy Indicator: The balance of retained earnings can inform a company's strategy regarding dividend payouts. A company with substantial retained earnings might choose to distribute more to shareholders, while a company prioritizing growth might retain more.
- Valuation: Retained earnings contribute to a company's book value, which is a factor in its overall valuation.
How the Calculation Works:
The calculation for ending retained earnings is straightforward and follows this fundamental formula:
Ending Retained Earnings = Beginning Retained Earnings + Net Income – Dividends Paid
Let's break down each component:
- Beginning Retained Earnings: This is the balance of retained earnings from the end of the previous accounting period (e.g., the end of the last quarter or year).
- Net Income: This is the profit a company has earned during the current accounting period after all expenses, interest, and taxes have been deducted. It's the "bottom line" from the income statement.
- Dividends Paid: These are the distributions of profits made by the company to its shareholders during the current accounting period. Dividends can be paid in cash or stock.
When net income exceeds dividends paid, retained earnings increase. Conversely, if dividends paid are greater than net income, or if the company incurs a net loss, retained earnings will decrease.
Example Usage:
Suppose a company, "Innovate Solutions Inc.," started the year with $150,000 in retained earnings (Beginning Retained Earnings). During the year, they generated a Net Income of $65,000. They also decided to pay out $25,000 in dividends to their shareholders.
Using the formula:
Ending Retained Earnings = $150,000 + $65,000 – $25,000 = $190,000
Therefore, Innovate Solutions Inc. would end the year with $190,000 in retained earnings. This increase of $40,000 ($65,000 Net Income – $25,000 Dividends) reflects the profits reinvested back into the business.
function calculateRetainedEarnings() {
var beginningRetainedEarnings = parseFloat(document.getElementById("beginningRetainedEarnings").value);
var netIncome = parseFloat(document.getElementById("netIncome").value);
var dividendsPaid = parseFloat(document.getElementById("dividendsPaid").value);
var resultElement = document.getElementById("retainedEarningsResult");
// Clear previous error messages
resultElement.textContent = "–";
resultElement.style.color = "#28a745"; // Reset to success green
// Validate inputs
if (isNaN(beginningRetainedEarnings) || isNaN(netIncome) || isNaN(dividendsPaid)) {
resultElement.textContent = "Error: Please enter valid numbers for all fields.";
resultElement.style.color = "red";
return;
}
// Ensure non-negative values where applicable for clarity, though accounting allows negatives
// For simplicity, we'll allow negative inputs but focus on the calculation.
// A net loss is represented by negative net income. Negative dividends are not typical.
var endingRetainedEarnings = beginningRetainedEarnings + netIncome – dividendsPaid;
// Format the result to two decimal places
var formattedResult = "$" + endingRetainedEarnings.toFixed(2);
resultElement.textContent = formattedResult;
}