What are retained earnings, Financial Management

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What are retained earnings? Why are they important?

Retained earnings represent the total of all the earnings available to common stockholders of a business during its complete history, less the sum of all the common stock dividends which it has ever paid. Those earnings that weren't paid out were by definition retained.

Retained earnings are vital because they represent amounts reinvested in a company on behalf of the company's owners instead of being paid out in the form of dividends.

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