Explanation of Retained Earnings:

The Retained Earnings value is listed on the Balance Sheet, and is the remaining portion of earnings generated by the company minus cash or dividend distributions to shareholders.  The Retained Earnings held by the company are often reinvested into the company or sometimes placed in other investments, but are not usually used to pay any day-to-day operational expenses.

Importance of Retained Earnings:

A company needs to spend money to make money, and should always be generating, retaining, and reinvesting earnings.  Without diligent reinvestment of earnings, a company will not easily be able to improve its operations. 

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