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Retained Earnings Growth

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Definition

Retained Earnings Growth is the percent increase/decrease of a company's retained net income over time. A company can use retained earnings to maintain current operations, or to invest in new ventures. Generally speaking, retained earnings growth is accompanied by subsequent increases in sales and profitability.

If a company's retained earnings at the end of 2008 were $12 million, and by the end of 2009 the company's retained earnings increased to $15 million, the company experienced a retained earnings growth of 25%.

Formula

Retained Earnings Growth over last year = (Retained Earnings at end of this year) / (Retained Earnings at beginning of this year) - 1

More generally, over t periods Compounded Retained Earnings Growth = (Retained Earnings this period/Retained Earnings t periods ago)^(1/t) - 1

YCharts calculates retained earnings growth as quarterly year on year growth rate. I.e. we calculate:

Retained Earnings Growtht = Quarterly Retained Earningst / Quarterly Retained Earnignst-4 - 1
(where t is expressed in quarters)

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