Retained Earnings Accounting Formula is an equation used to calculate the amount of net income from a business that has been held onto by that business over time. This formula typically takes into account retained earnings from the beginning of the accounting period, net income earned during the period and dividends paid during the same period. It’s an essential component in evaluating the financial health of a company, as it helps to determine a company’s ability to generate profit and sustain itself over long-term operations. Retained earnings is also an important factor when it comes to decision making within companies. To put it simply: if a business wants to make sure its financial stability remains solid, it needs to be well aware of how much it can retain itself.