How is "retained earnings" defined?

Retained earnings represent the cumulative amount of net income that a company has retained within the business after paying out dividends to shareholders. This figure reflects the wealth that has been generated by the company's operations that has not been distributed to its owners. Retained earnings are crucial for a company’s growth, as they can be reinvested for future expansion, used to pay off debt, or saved for future contingencies.

The concept of retained earnings becomes clear when differentiating it from other financial terms in the options provided. The total amount of dividends paid to shareholders is a distribution of earnings, not the accumulation of earnings within the company. Similarly, the amount distributed to shareholders as dividends also does not represent retained earnings but rather the portion of profits not kept within the company. Lastly, total revenue generated by the company is the gross income before expenses and does not account for earnings retained after operational costs and distributions.

Thus, retained earnings are a crucial aspect of a company’s financial health, showing how much profit is being reinvested as opposed to distributed, and is vital for understanding a company's long-term viability and growth prospects.