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What are retained earnings? Why are they important?
Retained earnings denote the sum of all the earnings obtainable to common stockholders of a business throughout its whole history, minus the sum of all the common stock dividends that it has ever paid. Those earnings which were not paid out were, through definition, retained.
Retained earnings are significant because they represent amounts reinvested in a company on behalf of the company's owners in place of being paid out in the form of dividends.
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