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Finance Calc Kit
Business

Retention Ratio Calculator

Calculate retention ratio, plowback ratio, dividend payout percentage, retained earnings, and sustainable growth rate (SGR) easily.

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Retention ratio (plowback rate)

70.00%

$70,000.00 retained of $100,000.00

Retained earnings

$70,000.00

Dividend payout ratio

30.00%

Sustainable growth rate (SGR)

10.50%

Retention ratio × ROE

Return on equity (ROE)

15.00%

Ratio summary

Net income
$100,000.00
Cash dividends paid
$30,000.00
Retention ratio (b)
70.00%
Payout ratio (1 − b)
30.00%
SGR = b × ROE
10.50%
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What is the retention ratio?

The retention ratio, also called the plowback ratio, measures the share of net income a company keeps to reinvest in the business instead of distributing as cash dividends. It is a core input for estimating how fast a firm can grow earnings without raising external capital.

Pair retention analysis with return on equity from the profitability ratios calculator to estimate sustainable growth. For dividend-focused income analysis, use the dividend yield calculator.

Retention ratio and payout ratio formulas

b=Net Income−Dividends PaidNet Incomeb = \frac{\text{Net Income} - \text{Dividends Paid}}{\text{Net Income}}
Payout Ratio=1−b\text{Payout Ratio} = 1 - b

Where b is the retention ratio. A 70% retention ratio means 70 cents of every dollar of net income is retained and 30 cents is paid out as dividends.

Sustainable growth rate (SGR)

SGR=b×ROE\text{SGR} = b \times \text{ROE}

Sustainable growth rate assumes the company maintains its current capital structure, dividend policy, and return on equity. It is the maximum growth rate achievable without issuing new equity or increasing financial leverage. For a dedicated SGR calculator with DuPont and PRAT modes, use the sustainable growth rate calculator.

Worked example

With net income of $100,000, dividends paid of $30,000, and ROE of 15%, retained earnings equal $70,000. The retention ratio is 70%, the payout ratio is 30%, and SGR equals 0.70 × 15% = 10.5%.

Frequently asked questions

What is a good retention ratio?
There is no universal target. High-growth companies often retain most earnings, while mature dividend payers retain less. Compare retention to peers in the same industry and stage of growth.
How is retention ratio different from payout ratio?
They are complements that sum to 100%. Retention ratio measures earnings kept in the business. Payout ratio measures earnings distributed to shareholders as dividends.
Can retention ratio exceed 100%?
Not when dividends are limited to net income. If a company pays more in dividends than it earns in a period, the payout ratio exceeds 100% and retention is negative, which is unsustainable long term.
What assumptions does SGR require?
SGR assumes constant ROE, stable dividend policy, and no new equity issuance. Real growth often differs because margins, asset turnover, and leverage change over time.
Can I share my scenario?
Yes. Input changes update the page URL so you can copy and share the exact retention and SGR calculation.

Resources and references

The formulas and methods in this calculator were checked against these independent sources.