The retention ratio is equal to:
A) (net income - dividends paid)/sales.
B) The change in retained earnings/sales.
C) 1 - dividend payout ratio.
D) Net income × (1 + dividend payout ratio).
E) 1 - plowback ratio.

Question

Quizplus · Accepted Answer

The retention ratio is equal to 1 - dividend payout ratio. This represents the portion of net income that the company retains for future growth and expansion rather than distributing it to shareholders as dividends.

The Retention Ratio Is Equal To