The amount of a publicly-traded company's post-tax earnings that are not paid in dividends. Most earnings retained are re-invested into the company's operations. Year-on-year tracking of the ratio of undistributed profits to dividends is important to fundamental analysis to investigate whether a company is increasing or decreasing its rate of re-investment. Undistributed profits form part of a company's equity, and are owned by shareholders. They are also called retained earnings, accumulated profits, undivided profits, and earned surplus.
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undistributed profitsany after-tax PROFITS that are reinvested (ploughed back) in the firm rather than being paid out to the owners of the company in DIVIDENDS. Such retained earnings form a valuable source of capital to be invested in additional FIXED ASSETS and CURRENT ASSETS. They serve to swell the value of the company to the shareholders and increase SHAREHOLDERS’ CAPITAL EMPLOYED by adding to revenue RESERVES. Retained profits are a form of business savings. See SAVINGS RATIO
Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005