Definition:

it refers to the part of the net income which is maintained by the firm instead of being distributed as dividends. It is also called as retained earnings.

Explanation:

Basically, it is the ratio of net income which is accumulated by the firm. this accumulated income is used for various purposes either to reinvest in the firm or to pay down the debts which the firm has taken in the past . it appears under the share holder’s equity on the firm’s balance sheet.It also invested within the firm in the form of capital expenditures i-e new technology or machinery , or for development and research either.