What is the plowback ratio?
Understand the Problem
The question is asking about the plowback ratio, which refers to the proportion of earnings a company retains for reinvestment instead of paying out as dividends. This is an important financial metric used to assess a company's growth and investment potential.
Answer
The percentage of net income retained and reinvested in the business after paying dividends.
The plowback ratio is the percentage of net income that a company retains and reinvests in the business after paying out dividends.
Answer for screen readers
The plowback ratio is the percentage of net income that a company retains and reinvests in the business after paying out dividends.
More Information
The plowback ratio is crucial for investors as it indicates how much of a company's profits are being reinvested to fuel future growth.
Tips
A common mistake is confusing the plowback ratio with the dividend payout ratio, which measures the percentage of earnings paid out as dividends.
Sources
- Plowback Ratio: Definition, Calculation Formula, Example - investopedia.com
- Retention Ratio (Plowback Ratio) | Formula, Example, Analysis - carboncollective.co
- Plowback Ratio | Formula + Calculator - wallstreetprep.com
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