What do retained earnings represent?

Retained earnings represent the portion of net income that a corporation retains for reinvestment in the business or to pay off debt, rather than distributing it to shareholders as dividends. This figure accumulates over time, providing insight into the financial health and growth potential of the company.

Retained earnings are an essential part of the equity section of the balance sheet and reflect a company's ability to generate profit over time. When a company earns profit, it can choose to distribute some of that money to shareholders as dividends, while the remaining portion that is not distributed contributes to retained earnings. This reinvestment can be critical for funding future projects, purchasing new assets, or improving operational efficiencies.

The other options are not accurate representations of retained earnings. Total revenues refer to the total income generated before any expenses are deducted, which does not account for the retained aspect. Liabilities represent what a company owes to outside parties and are a completely different component of the balance sheet. Equity available for dividends is not synonymous with retained earnings; rather, it would represent the portion of equity that could potentially be paid out, which is contingent on various factors, including retained earnings itself.