Retention rate

Retention Rate is the proportion of net income that is not paid in dividends. A firm earning $80 million after taxes and paying dividends of $20 million has a retention rate of $60 million/$80 million, or 75%. A high retention rate makes it more likely a firm's income and dividends will grow in future years. Also called earnings retention ratio, plowback ratio. It's often expressed as a percentage.

Retention rate is calculated as: (Net Income - Divdends)/Net Income

For those of you who dont know what divdends are, dividends is the money a business earns paid to shareholders.