A firm had earnings per share of $3.25 for the year.The book value per share at the beginning of the year was $13.If the firm paid out $.975 in dividends per share at the end of the year,what is the retention ratio for the firm?

Question

Quizplus · Accepted Answer

The retention ratio is calculated as (Earnings per Share - Dividends per Share) / Earnings per Share. Here, it is ($3.25 - $0.975) / $3.25 = 0.70 or 70%.

A Firm Had Earnings Per Share of $3