What is retention ratio?

 Retention Ratio:-

Corporations Payout a portion of their earnings as dividend to the shareholders and retain a portion of earnings as retained earnings. The portion of earnings retained with the company divided by net income is called retention ratio. 

For example XYZ a company has BDT 1, 00,000 as net income. It retained BDT 60,000 as retained earnings within the company so the retention ratio of XYZ Company will be-

Retention ratio = Net income - Dividend / Net income

                       = 100000 - 40000/100000

                       = 60000/100000

                       = 60%