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Retention Ratio Calculator

Calculate earnings retention ratio.

Input Values

Alternative Method:

Results

Retention Ratio
Retained Earnings
Payout Ratio

Interpretation

Enter values to calculate retention ratio

Formula & Education

Formula

Retention Ratio = (Net Income - Dividends) ÷ Net Income
OR
Retention Ratio = 1 - Dividend Payout Ratio

Key Terms

Net Income: Company's total profit after taxes
Dividends: Cash payments made to shareholders
Retained Earnings: Profits kept in the company for reinvestment

Interpretation Guidelines

Low (0-30%): High dividend payments, limited reinvestment
Moderate (30-70%): Balanced approach to dividends and growth
High (70-100%): Focus on reinvestment and growth

Usage Tips

  • • Compare with industry averages
  • • Consider company growth stage
  • • Analyze alongside growth metrics
  • • Look at historical trends
  • • Consider shareholder preferences

Examples

Growth Company

Net Income: $1,000,000
Dividends Paid: $100,000
Retention Ratio: 90%
High retention for reinvestment

Mature Company

Net Income: $500,000
Dividends Paid: $300,000
Retention Ratio: 40%
Higher dividend payouts

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