What is meant by earned capital?

Earned capital refers specifically to the portion of a corporation's earnings that is retained rather than distributed to shareholders as dividends. This retained earnings account reflects the cumulative profits that a company has reinvested in its operations over time. By retaining and reinvesting its earnings, a company can finance growth, pay down debt, or build reserves for future needs without having to rely on external financing.

Accumulating earned capital is essential for sustaining and expanding a business. It can indicate how effectively a company is managing its profits and investing in future growth opportunities. Such capital is a critical part of a company's equity section on the balance sheet, underlining its long-term financial health and stability.

In contrast, other options focus on different aspects of a company's finances: capital received from investors pertains to equity financing, total revenues generated refers to incoming funds from sales or services, and the value of assets owned describes the company’s total asset value rather than the retained earnings specifically. Hence, earned capital is best represented by the portion of earnings that the corporation retains for reinvestment in the business.