A more thorough explanation:

Retained Earnings are the profits a company has earned but has not paid out as dividends to its shareholders. This means that the company has kept the money for its own use instead of distributing it to its investors.

For example, if a company earns $100,000 in a year and pays out $20,000 in dividends to its shareholders, the remaining $80,000 is considered retained earnings. The company can use this money to reinvest in the business, pay off debt, or fund new projects.

The amount of retained earnings a company has can be calculated by adding the net income (or loss) to the retained earnings from the beginning of the accounting period and then subtracting any cash or stock dividends paid out.

Whether a company chooses to keep more retained earnings or pay out more dividends depends on its goals and the preferences of its shareholders. For example, a stable company with shareholders who prefer dividends may allocate more of its profits to dividends than to retained earnings. On the other hand, a growth-focused company may allocate more of its profits to retained earnings to fund new projects or pay off debt.