Reserves can be define as accumulated net income of the company that has been kept intact and not distributed as dividends. These
retained earnings are used later in the business for such things as expansion, to pay off debt, and other uses. Some of a company’s equity is shown on the balance sheet called retained earnings which is computed by adding the current net income to the retained earnings recorded in the previous period minus any dividends given out. This figure is crucial to identify as it reveals how many bucks businesses poured back into their operations to fuel expansion instead of rewarding investors.
