Retained Earning Ratio
The Retained Earnings ratio is expressed as a percentage, and is the proportion of net income retained to fund the operational needs of a business. It is the opposite of the dividend payout ratio so that’s also why it is also called the retention ratio. This ratio is typically higher for growth companies that are experiencing rapid increases in revenues and profits. A growth company would prefer to plow earnings back into its business, if it believes that it can reward its shareholders by increasing revenues and profits at a faster pace than one which the shareholders could have achieved by investing their dividend receipts.
Calculated as: Net Income / (Net Income - Dividends) X 100