Retention Ratio indicates the percentage of a company's earnings that are not paid out in dividends but credited to retained earnings. It is the opposite of the dividend payout ratio, so that also called the retention rate.
Retention Ratio = 1 - Dividend Payout Ratio = Retained Earnings / Net Income
The payout ratio is the amount of dividends the company pays out divided by the net income. This formula can be rearranged to show that the retention ratio plus payout ratio equals 1, or essentially 100%. That is to say that the amount paid out in dividends plus the amount kept by the company comprises all of net income.
Famous quotes containing the words retention and/or ratio:
“Unless a group of workers know their work is under surveillance, that they are being rated as fairly as human beings, with the fallibility that goes with human judgment, can rate them, and that at least an attempt is made to measure their worth to an organization in relative terms, they are likely to sink back on length of service as the sole reason for retention and promotion.”
—Mary Barnett Gilson (1877–?)
“Official dignity tends to increase in inverse ratio to the importance of the country in which the office is held.”
—Aldous Huxley (1894–1963)