Accounting Knowledge: Profit Retention Rate

What is?

The profit retention rate refers to the company's after tax.

A formula for calculating profit retention rate

The formula for calculating the profit retention rate is:

Profit retention rate = (after tax profit payable dividend) /

The profit retention rate shows how much of the company's after tax profits are paid for dividends and how much it is used to retain earnings and expand operations.

The higher the profit retention rate, the more attention is paid to the stamina of development, and the development of enterprises will not be affected by excessive dividends. The profit retention rate is too low, or that the company's production and operation is not smooth, so that more profits will have to be made to make up for the loss, or too much dividends and limited development potential.

The reinvestment rate, also known as the internal growth ratio, indicates that the company reinvested its earnings to support the growth of the company.

The higher the reinvestment rate, the stronger the company's ability to expand its business and vice versa.

Take A company as an example, its profit after tax is 640 thousand yuan, dividends should be 500 thousand yuan, and the profit retention rate is:

Profit retention rate = (64-50) /64 * 100%=21.88%