Retention Ratio Calculator
Calculate retention ratio to analyze company reinvestment policy and growth strategy
Calculate Retention Ratio
Company's total net profit for the period
Total dividends distributed to shareholders
Retention Ratio Results
Formula used: Retention Ratio = (Retained Earnings ÷ Net Income) × 100
Calculation: ($0.00 ÷ $0.00) × 100 = 0.00%
Interpretation: Most earnings distributed as dividends, typical of mature companies.
Company Type Analysis
Example Calculation
Company Alpha Example
Net Income: $1,000,000
Dividends Paid: $350,000
Calculation Steps
1. Retained Earnings = Net Income - Dividends Paid
= $1,000,000 - $350,000 = $650,000
2. Retention Ratio = (Retained Earnings ÷ Net Income) × 100
= ($650,000 ÷ $1,000,000) × 100 = 65%
Financial Ratio Components
Retention Ratio
Percentage of earnings reinvested
Retained Earnings ÷ Net Income
Retained Earnings
Profit kept in the business
Net Income - Dividends
Dividend Payout
Percentage distributed to shareholders
Dividends ÷ Net Income
Analysis Tips
High retention = Growth focus, typical of tech companies
Low retention = Income focus, typical of utilities
Compare with industry averages for context
Consider company lifecycle and growth stage
Understanding Retention Ratio
What is Retention Ratio?
The retention ratio measures the proportion of net income that a company retains for reinvestment rather than distributing as dividends to shareholders. It indicates management's strategy regarding growth versus immediate returns to investors.
Why is it Important?
- •Reveals company's growth strategy and priorities
- •Helps predict future growth potential
- •Essential for dividend-focused investors
- •Indicates management's confidence in business prospects
Formula Breakdown
Retention Ratio = (Retained Earnings ÷ Net Income) × 100
- Retained Earnings: Net Income - Dividends Paid
- Net Income: Company's total profit
- Dividends: Cash distributed to shareholders
- Result: Percentage of earnings retained
Note: Retention Ratio + Dividend Payout Ratio = 100%