RAW files preserve much more of the camera sensor’s original data before heavy in-camera processing is applied. That’s the key advantage.

Compared with JPEG (and usually 8-bit PNG), a RAW file typically keeps higher bit depth plus data that has not yet had major decisions baked in, such as white balance, tone curve/gamma, black and white points, and color rendering. In a JPEG, those choices are already applied, and some original information is discarded to create a smaller, ready-to-view image.

That matters in editing because:

• higher bit depth gives more tonal steps, so large adjustments are less likely to cause banding or quantization
• unbaked white balance and tone mapping give more latitude to recover shadows/highlights and change color cleanly
• once clipped tones or discarded gradations are removed in JPEG conversion, they generally cannot be reconstructed later

JPEG compression artifacts can also become more visible with repeated editing/saving, though compression is not the main reason RAW is more flexible.

So yes: both dynamic range handling and bit depth are part of it, but the bigger idea is that RAW retains sensor data and postpones processing decisions, while JPEG/PNG stores a more finalized image.