Retained earnings refer to the portion of a company's profits that is not distributed to shareholders as dividends but is instead reinvested in the business. This can be used for various purposes, such as funding new projects, paying off debt, or saving for future needs. Retained earnings are an important indicator of a company's financial health and growth potential. The retained earnings figure is reported on a company's balance sheet under the equity section. It is calculated by taking the previous period's retained earnings, adding net income, and subtracting any dividends paid. This accumulation reflects the company's ability to generate profit over time.