What do retained earnings reflect in the financial statements?

Retained earnings represent the cumulative profits that a company has chosen to keep within the business rather than distributing them as dividends to shareholders. This amount is reflected in the equity section of the balance sheet and indicates how much of the company's net income has been reinvested to support operations, fund expansion, or pay down debt over time. Retained earnings accumulate over the years and show investors and stakeholders the company’s ability to generate and reinvest profit for future growth.

In contrast, total assets represent everything the company owns, the amount owed to creditors refers to liabilities and reflects obligations, while total revenue earned pertains to the income generated from the company's primary business activities during a specific period. Each of these concepts plays a different role in financial analysis but does not encapsulate the essence of retained earnings, which is specifically about profits being retained within the company.