Dr. Paul Borosky, DBA, MBA
Business Consultant & Author
Guide 18 of 34 · The Balance Sheet
What Are Retained Earnings? (Apple Example)
Record profit. Negative retained earnings. Both are true.
Apple earned $112.0 billion in fiscal 2025. Its balance sheet still shows retained earnings of negative $14.3 billion. That looks like a company that has lost money for years. It is the opposite. This guide shows what retained earnings measure, how they are built, and why Apple’s number went below zero.
Last Updated: 10/27/2026 · Written by Dr. Paul Borosky, DBA, MBA
The Short Answer
What Are Retained Earnings?
Textbook Definition
Retained earnings are the cumulative net income a company has kept since it began, after subtracting dividends and other distributions to shareholders. They sit in the equity section of the balance sheet.
In Plain English
Every year, a company decides what to do with its profit: pay it out or keep it. Retained earnings are the running total of what it kept. A growing number means profit stays inside. A shrinking number means more is going out.
Retained Earnings Roll-Forward
Beginning Retained Earnings + Net Income − Dividends − Certain Buybacks
Apple, end of fiscal 2025: ($14.3B)
In Apple’s 10-K the line is called accumulated deficit once it turns negative. Same line, different label. The textbook name and the filing name describe the same running total.
One Real Company
Apple’s Retained Earnings and Equity, 2021 to 2025
Positive in 2021. Negative every year since. Now look at the equity line underneath it: it finished higher than it started.
Read the table from the bottom up. Net income runs close to $100 billion a year. Dividends take about $15 billion of it. Buybacks take $78 billion to $95 billion more. When payouts beat profit, retained earnings shrink. Do that for a few years and the balance crosses zero. Nothing about the business broke. The money simply went to shareholders instead of staying on the books. That is why the book still grades this line a B, not an F.
| Line | 2025 | 2024 | 2023 | 2022 | 2021 |
|---|---|---|---|---|---|
| Retained earnings | (14,264) | (19,154) | (214) | (3,068) | 5,562 |
| Total equity | 73,733 | 56,950 | 62,146 | 50,672 | 63,090 |
| Equity as % of total assets | 20.5% | 15.6% | 17.6% | 14.4% | 18.0% |
| Net income | 112,010 | 93,736 | 96,995 | 99,803 | 94,680 |
| Dividends paid | 15,421 | 15,234 | 15,025 | 14,841 | 14,467 |
| Stock buybacks | 90,711 | 94,949 | 77,550 | 89,402 | 85,971 |
Source: Apple Form 10-K filings, fiscal 2021 to 2025, as analyzed in the book. $ millions.
The Method
How to Read Retained Earnings in 5 Steps
Find the line in equity.
It sits under shareholders’ equity on the balance sheet. Watch for the label accumulated deficit when it is negative.
Read the five-year trend.
Rising means the company keeps profit to grow. Falling means more cash is going out than coming in as profit, or the company is losing money.
Check net income first.
If net income is strong and positive, a falling balance is a payout choice, not a loss. Apple earned $94.7 billion or more every year.
Find the payouts.
Go to the financing section of the cash flow statement. Add dividends and buybacks. Compare the total to net income.
Read it next to total equity.
Retained earnings is one piece of equity. Apple’s equity still rose from $63.1 billion to $73.7 billion, a quiet sign of strength.
Losses or Payouts?
A negative number has two possible causes. Years of losses, which is a warning. Or years of paying out more than the company earns, which is a strategy. The test is simple: look at net income. Apple never lost money in this period. Its deficit is the paper trail of its buybacks.
Compare It
Apple vs. Microsoft: Opposite Signs on the Same Line
| Latest fiscal year | Apple | Microsoft |
|---|---|---|
| Retained earnings | about ($14B) | about $238B |
| Total equity | about $74B | about $343B |
| Net income | $112B | $102B |
Microsoft’s fiscal year ends in June, Apple’s in September.
Similar profits. Opposite retained earnings. Microsoft keeps its earnings on the books. Apple sends more than it earns back to shareholders. That one choice makes Apple’s return on equity look enormous, because the equity underneath it is so small.
Beginner Traps
What Do Beginners Get Wrong About Retained Earnings?
- Assuming a negative number always means years of losses.
- Thinking retained earnings is cash sitting in a bank account.
- Missing the label change to accumulated deficit in the 10-K.
- Reading the balance without checking net income next to it.
- Forgetting that buybacks and dividends both pull it down.
- Ignoring how a small equity base inflates return on equity.
How the Book Grades Apple’s Equity Lines
From the Book
A Bookkeeping Result, Not a Struggle
Balance Sheet · Retained Earnings
Why the Number Went Negative
So this is a bookkeeping result of aggressive shareholder payouts, not a sign of a struggling business. It is a perfect example of why you never read a single number in isolation.
Every equity line, five years of Apple numbers, and the Microsoft contrast. All of it is in the book.
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Your retained earnings work the same way: profit kept minus what you took out. Start with the owner version of the balance sheet. Want a second set of eyes on how much to keep in the business? See fractional CFO services.
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Retained Earnings Questions
Can retained earnings be negative?
Are retained earnings the same as cash?
How do you calculate retained earnings?
Is negative retained earnings a red flag?
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Related Guides
See how this line fits the whole picture in the balance sheet guide. Every term is in the glossary.
Written by Dr. Paul Borosky, DBA, MBA, business consultant, author, and adjunct finance instructor with an MBA focused in finance.
This page is for general educational purposes only. It is not investment, financial, tax, accounting, or legal advice, and nothing here is a recommendation to buy or sell any security. Apple and Microsoft figures come from their public filings as analyzed in the book. Apple and Microsoft are trademarks of their respective owners, and this page is not affiliated with or endorsed by either company.