Final answer:
Keeping track of retained earnings is important for financial analysis and decision making in business.
Step-by-step explanation:
In business, keeping track of the retained earnings of a firm is important for financial analysis and decision making. Retained earnings represent the accumulated profits that are not distributed to shareholders as dividends.
By tracking retained earnings over time, a firm can assess its profitability, financial stability, and growth potential. It allows the management to evaluate the effectiveness of its business strategies and make informed decisions regarding investments, expansion, or dividend payments.
For example, if a company consistently has positive retained earnings, it indicates that it is generating profits and reinvesting them back into the business for future growth. On the other hand, negative retained earnings may suggest financial difficulties or losses over time.