+1 862 207 3288 This is a very significant area of concern for the company as far as profit distribution is concerned. Here, primarily there are two things to care about – one is the dividend payout ratio and the other one is the retention ratio. Each ratio has its own significance.
Dividend Payout Ratio can be a fixed percentage of the Net Income or a fixed amount regardless of the Net Income the firm earns.
Retention Ratio is important as far as the sustainable growth rate of the firm is concerned. Any company cannot grow just by financing from outside. It also needs to see the vitality of using the resources of company’s own money retained.
