Question

Jonah’s Restaurant reports net income of $20,000 during the year 2015. It distributes a dividend of $6,000 to its shareholders. Calculate the retention ratio.​

Answer 1

Retention ratio = (net income - dividends) / net income

retention ratio = (20,000 - 6000) / 20000 = 14,000/20,000 = 0.7 = 70%