# Retained earnings

Profit the company has kept over its life and never paid out to owners.

It is the line a new owner meets on their own [balance sheet](https://searchspheresource.com/glossary/balance-sheet) and misreads first, because it is not cash. The money was earned and spent on equipment, stock and payroll years ago, so a large retained earnings figure sits happily beside an empty bank account. Which of the two you inherit depends on how you bought. A stock purchase carries the balance sheet across with its history intact; an [asset purchase](https://searchspheresource.com/glossary/asset-vs-stock-sale) starts the account at zero on day one, because the entity is new. Ask which one your deal is before reading anything into the number.

In numbers: A company showing $800,000 of retained earnings and $40,000 in the bank has spent the difference on assets and [working capital](https://searchspheresource.com/glossary/working-capital), which is the ordinary case rather than a warning.

Source: https://searchspheresource.com/glossary/retained-earnings
Not dated: A definition is editorial: what a term means, why it matters, and an example. None of it reads a source that can go stale, so there is no date to take and a stamped one would be the build time wearing a costume.

Site index for machines: https://searchspheresource.com/llms.txt