# Retention Ratio Calculator

URL: https://speedycalculator.com/calculators/finance/retention-ratio/
Last updated: 2026-10-25

> The retention ratio calculator works out the share of net income a company keeps (retains) rather than paying as dividends – the plowback ratio used to estimate sustainable growth.

## Inputs

- Net income
- Dividends paid
- Return on equity (optional, for growth) (%)

## Results

- Retained earnings
- Retention ratio
- Payout ratio
- Sustainable growth rate

## Formula

```
Retained earnings = net income − dividends
Retention ratio = retained earnings ÷ net income = 1 − payout ratio
```

## Explanation

Growth companies often retain all their earnings to reinvest; mature companies retain less and pay more dividends. Combined with ROE, the retention ratio estimates how fast a company can grow without new financing.

### How to use the Retention Ratio Calculator

- **Net income**
- **Dividends paid**
- **Return on equity (optional, for growth)**

Results update as you type, and every field accepts the units shown in its menu.

### How it works

Enter net income and the dividends paid.

### Tips

- Take figures from the same financial statements and the same fiscal year.
- Compare ratios with companies in the same industry, not across industries.
- Use several valuation measures together; no single ratio tells the whole story.
- Market prices change every second – refresh the share price before you rely on a result.

### Common mistakes to avoid

- Mixing per-share figures with company totals.
- Using trailing earnings for one company and forward earnings for another.
- Forgetting dilution from options and convertible securities.

### Inputs explained

FieldWhat to enterNet incomeAmount in your currencyDividends paidAmount in your currencyReturn on equity (optional, for growth)In %

### What each result means

- **Retained earnings** = [Net income] - [Dividends paid]
- **Retention ratio** = ([Net income] - [Dividends paid])÷[Net income]×100
- **Payout ratio** = [Dividends paid]÷[Net income]×100
- **Sustainable growth rate** = [Return on equity (optional, for growth)]×[Retention ratio]÷100

### Example values

How the main result changes when **Net income** changes and everything else stays at the example values above:

Net incomeRetention ratio (%)5,000,000307,500,00053.3310,000,0006512,500,0007215,000,00076.6720,000,00082.5

## Worked example

Inputs — Net income: $10,000,000; Dividends paid: $3,500,000; Return on equity (optional, for growth): 14 %.

Results — Retained earnings = $6,500,000.00; **Retention ratio = 65 %**; Payout ratio = 35 %; Sustainable growth rate = 9.1 %.

## FAQ

**What is the retention ratio?**
The share of profit kept in the business.

**Is a high retention ratio good?**
It's good if the company can reinvest at a high return.

**How is it related to growth?**
Sustainable growth = ROE × retention ratio.

**What formula does the Retention Ratio Calculator use?**
Retained earnings = net income − dividends.


## Sources

- [Corporate Finance Institute – financial ratios](https://corporatefinanceinstitute.com/)