Retained earnings are a component of shareholders’ equity that represents the accumulated net income that a company has retained after paying dividends to its shareholders. Retained earnings reflect the company’s ability to generate profits and reinvest them in its growth. Retained earnings are reported on the balance sheet as a cumulative total from the inception of the company to the current period. Retained earnings can be used for various purposes, such as expanding the business, paying off debt, or repurchasing shares.