After deduction of all expenses, the net profits of a company are split into two parts: dividend and plough-back. Ploughed-back of profits is retained as reserves. It is important because it increases the reserves of a company as well as provides the company with funds required for its growth and expansion. Generally, the growing companies maintain a high level of plough-back, whereas companies that have no intention of expanding are unlikely to plough back a large portion of their profits.