Retention ratio is the ratio at which the companies retain its profits for reinvestment, capital expansions, and future growth. Normally companies with growth stocks have a higher or even 100% retention ratio.
Retention ratio is calculated by subtracting the dividend payout ratio from 1. If a company had total profits of $5000 and it paid $2.0 as dividend to its 1000 shareholders. This way the retained profits will be $3000 = ($5000 – ($2 x 1000)). Hence the retention ratio will be 60% i.e. ($3000 / $5000). In other words the payout ratio was 40% i.e. (1- 60%).
Refer to Problem 17-1. What additional funds would be
Pierce Furnishings generated $2 million in sales during 2008, and
Lewin Skis, Inc., today expects to earn $8.
Broslofski Co. maintains a positive retention ratio and keeps its debt
Testaburger, Inc., uses no external financing and maintains a positive
Carter Corporation’s sales are expected to increase from $5 million in
Suppose that Gyp Sum Industries currently has the following balance sheet,
Suppose a firm has a retention ratio of 60 percent, net
Broslofski Co. maintains a positive retention ratio and keeps its debt
Suppose that Wind Em Corp. currently has the following balance sheet
