They generally look at both. If you didn't do well in a class though, retaking it will only help your application. Especially early in your college career, making a low grade is not that detrimental, as long as they can see from your record that you learned from it and imporved. As an Adcom told me..."if we have two students applying with a 3.00, but one made A's freshman year and steadily declined, but the other one made C's freshman year but steadily improved, we would prefer the second applicant."