Retained earnings is the amount that comapany keeps in itself after paying dividends which is from the profits earned by the comapny. When comapany makes good profit I will give dividend after that if the fund left it will convert it in to the retained earnings which the company can use such fund in the future companies needs. If comapany is making profit from many years it will have good retained earnings which company can use such funds for capitalisation, purchase of new assets, purchasing new company or merging with other companies. When comapany has good amount of retained earnings it can use such funds for future uncertainty in the business.if business one day face the losses the company can use this fund for the business. If company face the funds problem for any purchase this fund can be utilised. As innovation is important for any kind of business from the profit business can spend retained earnings on the innovation or researches. This fund will help the company in uncertainty times.