Retained earnings represent the cumulative amount of a company's net profits that are kept or "retained" within the business rather than distributed to shareholders as dividends. They are reported in the equity section of the balance sheet. Retained earnings are crucial because they provide funding for business expansion, debt repayment, or future investments without relying on external financing. This figure reflects a company’s ability to reinvest profits for growth and financial stability, making it an essential indicator of long-term performance and profitability for investors and stakeholders.
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