Glossary · Reading the business
Retained earnings
In short
The cumulative profits a business has kept rather than distributed to shareholders as dividends. It represents capital reinvested in the business, building its equity.
What it means in a deal
On the balance sheet, retained earnings show how much profit the business has accumulated over time. While primarily an accounting figure, it reflects a history of profitability and financial strength. It's part of understanding the overall health and equity position of the business you're buying.
Related terms
Common questions about Retained earnings
- Can a business's retained earnings count as equity injection?
- Can I use my business's retained earnings from a prior venture as equity injection?
- How does the SBA view a seller's retained ownership after an acquisition?
- How does the SBA handle a seller's retained ownership in a change-of-ownership transaction?
- How does the SBA handle a seller's retained ownership in a 7(a) change-of-ownership transaction?
- If the seller holds a minority stake (e.g., 5%) after the acquisition, does their retained equity count towards my 10% injection?
Defined by CapBench SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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