# Retention Ratio (Plowback Ratio)

This article needs additional citations for verification. This reasoning is easily understandable when looking at savings: Leveraged buyout Mergers and acquisitions Structured finance Venture capital. Since companies need to retain some portion of their profits in order to continue to operate and grow, investors value this ratio to help predict where companies will be in the future.

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Divide the amount of the decrease by the original amount to calculate the rate of decrease expressed as a decimal. In this example, divide , by 1 million to get 0. Multiply the rate of decrease by to convert from a decimal to a percentage. In this example, multiply 0. Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics.

How to Calculate Percentage Reduction. How to Calculate Percent of Return. How to Calculate Percentage Decrease on a Calculator.

Finding the Percent of Increase or Decrease. How to Calculate Rate of Decrease. They rarely give dividends because they want to reinvest and continue to grow at a steady rate.

The opposite is true about established companies like GE. GE gives dividends every year to it shareholders. It might mean that the stock is continually appreciating because of company growth however. This ratio helps illustrate the difference between a growth stock and an earnings stock. Here is how Ted would calculate his plowback ratio. In other words, Ted keeps 80 percent of his profits in the company. Only 20 percent of his profits are distributed to shareholders. Depending on his industry this could a standard rate or it could be high.

Quick Ratio Return on Assets. What Does Retention Ratio Mean?