The percentage of net income that is added to retained earnings is called the:

Question

Quizplus · Accepted Answer

The percentage of net income that is added to retained earnings is called the retention ratio, which represents the portion of earnings that are being reinvested in the company rather than paid out as dividends. The payout ratio represents the opposite - the percentage of earnings that are being paid out to shareholders as dividends. The profit margin is the ratio of net income to total revenue, the internal growth rate is the maximum rate at which a company can grow without obtaining external financing, and the intensity ratio is not a commonly used financial term. Therefore, the best choice is C - the retention ratio.

The Percentage of Net Income That Is Added to Retained