Answer :
Final answer:
Retained earnings are the accumulated profits that a company retains for reinvestment instead of distributing as dividends to shareholders, contributing to the company's growth and future profitability.
Explanation:
Retained earnings represent the profit that a company accumulates each accounting period and retains for reinvestment rather than distributing as dividends to shareholders. This concept reflects the portion of profits not allocated to shareholders, contributing to the company's growth and future profitability. Shareholder's equity is composed of shareholder's capital (contributions made by shareholders) and retained earnings, showing the total value of the shareholders' stake in the company.
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