What are retained earnings?

Retained earnings represent the cumulative amount of a company's profits that have been kept in the business rather than distributed to shareholders as dividends. This retained income is a crucial component of the equity section on a company's balance sheet. It reflects the reinvestment of profits back into the operations to fund growth, pay off debt, or build cash reserves.

In essence, retained earnings grow as the company earns more profit over time, minus any dividends that are paid out to shareholders. This figure is important for assessing a company's financial health and its ability to reinvest in its business activities, expand operations, and ultimately increase shareholder value. Hence, option B accurately encapsulates this concept as it emphasizes the earnings that are retained within the corporation rather than those distributed as dividends or represented by other options like total revenues or shareholder investments.