The retention ratio is the:
A)net income divided by total equity.
B)percentage of net income paid out to shareholders.
C)net income divided by the number of shares outstanding.
D)percentage of net income held by a firm for future growth.
E)inverse of the dividend payout ratio.

Question

Quizplus · Accepted Answer

The retention ratio is the percentage of net income that a company retains to reinvest in the business for future growth. Therefore, option D is the correct choice as it represents the percentage of net income held by a firm for future growth. Option A is incorrect as it calculates the return on equity (ROE). Option B is incorrect as it represents the dividend payout ratio, which is the percentage of net income paid out to shareholders as dividends. Option C is incorrect as it calculates the earnings per share (EPS). Option E is incorrect as it is not a recognized formula or concept.

The Retention Ratio Is The