The percentage of a firm's net income that is reinvested back in the firm is called the _____ ratio.

Question

Quizplus · Accepted Answer

The retention ratio is the percentage of a firm's net income that is reinvested back in the firm, instead of being paid out as dividends or used to repurchase stock. Option A, Payout ratio, refers to the percentage of earnings paid out as dividends to shareholders. Option B, Internal ratio, is not a commonly used financial ratio. Option C, Earnings ratio, is also not a commonly used financial ratio. Option E, Net income, is a measure of a company's profitability, but not a ratio. Therefore, the correct answer is D) Retention ratio.

The Percentage of a Firm's Net Income That Is Reinvested