An Ottawa ﬁrm earns net income of $25,000 in a given year and the ﬁrm's retained earnings increase $15,000 for that same year. The retention ratio is:

Question

Quizplus · Accepted Answer

The retention ratio is calculated by dividing the increase in retained earnings by the net income. Here, $15,000 (increase in retained earnings) divided by $25,000 (net income) equals 0.60 or 60%.

An Ottawa ﬁRm Earns Net Income of $25,000 in a Given