What is the definition of retained earnings in accounting?

Retained earnings are the amounts of net that a business retains in the company out of the net income rather than giving the money in dividends to shareholders. This number increases with time as a company makes profit and it retains the profits to put it back into use. The retained earnings are listed under equity part of the balance sheet and indicate the strength of the firm and its capacity to finance growth through its own capital. They play a very important role in funding growth, paying off obligations, or surviving in low economic times without seeking outside debt, which is why they are a necessary component of long-term financial strategy.

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