Retained earnings are the portion of a company's net income that is kept by the company, rather than being paid out as dividends to shareholders. Retained earnings represent a company's accumulated earnings over time, and they are used to finance the company's growth and investments in the future.

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Retained earnings are reported in the equity section of a company's balance sheet. They are an important source of capital for a company and can help to finance expansion, research and development, and other growth initiatives. The amount of retained earnings a company retains depends on a variety of factors, including its growth prospects, its investment needs, and its dividend policy.

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In some cases, companies may decide to pay out a portion of their retained earnings as dividends to shareholders. Dividends are payments made to shareholders out of a company's profits, and they provide a return on investment for shareholders. Companies typically pay dividends to reward shareholders for their investment and to signal their financial strength and stability.

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