Which of the following best describes retained earnings?

Retained earnings represent the cumulative amount of net income that a company has retained, rather than distributed as dividends to its shareholders. This figure reflects the portion of profits that the company has decided to reinvest in the business or utilize for other purposes, such as paying off debts or funding new projects. By retaining earnings, a company can bolster its equity base, which can be crucial for funding growth and expansion.

Options that relate to liabilities, cash availability, or revenue generation do not capture the intent or nature of retained earnings. Retained earnings are not about the total liabilities a company has; they focus exclusively on the profits retained from total net income. Similarly, while cash available for operating expenses is an important aspect of a company’s liquidity, it is not synonymous with retained earnings, as those may not be immediately available as cash. Lastly, revenue generated within a fiscal quarter does not correlate to retained earnings, which account for accumulated profits over time, rather than just the income from a specific period.