What does "retained earnings" represent?

Retained earnings represent the cumulative net income that a company has kept in the business rather than distributing it to shareholders as dividends. This figure reflects the profits that the company has reinvested into its operations over time, which can be used for various purposes, including funding growth opportunities, paying off debt, or enhancing the company's financial stability.

The concept of retained earnings is essential for understanding a company's ability to reinvest in itself and contribute to long-term value creation. It is a critical component of shareholders' equity on the balance sheet and provides insight into how effectively a company is managing its profits. This retention of earnings indicates a commitment to fostering future business growth rather than solely focusing on immediate profit distribution.