Retention Ratio Calculator: Measure Your Company’s Reinvestment Efficiency
Retention ratio shows how much profit stays in the business. Enter net income and dividends; the calculator returns the share kept, which ranges from 0-100 %. In 2022 S&P 500 companies retained about 56 % of earnings (FactSet, 2023).
Retention Ratio Calculator
Retention Ratio:
The retention ratio represents the proportion of earnings retained by the company for reinvestment or debt repayment.
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How to use the tool
Net Income (USD) – type the company’s bottom-line profit. Example entries: 6 000 000 or 915 450.
Dividends (USD) – enter cash paid to shareholders. Example entries: 1 200 000 or 225 000.
Press Calculate; the script divides retained earnings by net income and shows a percentage.
The ratio ranges from 0 % (all paid out) to 100 % (nothing paid) (CFI, 2023).
S&P 500 firms retained 56 % of earnings in 2022 (FactSet, 2023).
Global dividends totaled $1.56 trillion in 2022 (Janus Henderson, 2023).
High-growth tech companies often keep >80 % of profits (McKinsey Global Institute, 2022).
FAQ
What is the retention ratio?
The retention ratio is the share of earnings a company keeps for reinvestment or debt reduction instead of paying dividends (Investopedia, 2023).
How does this calculator work?
You enter net income and dividends; the script subtracts dividends from income and divides by income to return a percentage.
Why can’t dividends exceed net income?
Dividends paid above earnings would require borrowing or using reserves, so the tool blocks that entry to mirror prudent finance practice (SEC Guide 3, 2020).
What is a “good” retention ratio?
Growth firms aim for 50–100 %, while mature utilities average 25–50 % (Morningstar Sector Report, 2023).
How does retention relate to the dividend-payout ratio?
The two always sum to 100 %. A 70 % retention implies a 30 % payout (CFI, 2023).
Can the ratio be negative?
No. Negative values would mean dividends exceeded earnings, a condition disallowed under most corporate statutes (Delaware Code §170, 2022).
Does a high ratio boost valuation?
Retained earnings fund projects that raise future cash flow, which “tends to lift discounted valuation multiples” (Damodaran, 2022).
How often should you recalculate?
Analysts update the ratio each fiscal quarter to capture policy changes (PwC Financial Reporting Survey, 2023).
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