Accounting Retention Rate Calculator Examples
Worked examples showing how net income, dividends, and opening retained earnings affect retention rate and ending retained earnings.
These examples use the same basic accounting relationship: net income less dividends equals the period’s retained earnings increase. They show how different payout choices change the retention rate and estimated closing retained earnings balance.
Growing business with a moderate dividend
Medium-sized business, annual results
Input Summary
Net income
$100,000
Dividends paid
$30,000
Beginning retained earnings
$250,000
Calculation Breakdown
- 1Retained earnings increase$100,000 − $30,000$70,000
- 2Retention rate($70,000 ÷ $100,000) × 10070.0%
- 3Payout ratio($30,000 ÷ $100,000) × 10030.0%
- 4Ending retained earnings$250,000 + $70,000$320,000
Result Summary
Ending retained earnings
$320,000
Accounting Retention Rate Calculator
The business retains $70,000, or 70.0% of its net income, and estimates ending retained earnings of $320,000.
Business retaining all current profit
Early-stage business funding expansion
Input Summary
Net income
$48,000
Dividends paid
$0
Beginning retained earnings
$82,000
Calculation Breakdown
- 1Retained earnings increase$48,000 − $0$48,000
- 2Retention rate($48,000 ÷ $48,000) × 100100.0%
- 3Payout ratio($0 ÷ $48,000) × 1000.0%
- 4Ending retained earnings$82,000 + $48,000$130,000
Result Summary
Ending retained earnings
$130,000
Accounting Retention Rate Calculator
The business retains 100.0% of net income and estimates ending retained earnings of $130,000.
Mature business with a high dividend payout
Established company with annual shareholder dividends
Input Summary
Net income
$500,000
Dividends paid
$400,000
Beginning retained earnings
$1,200,000
Calculation Breakdown
- 1Retained earnings increase$500,000 − $400,000$100,000
- 2Retention rate($100,000 ÷ $500,000) × 10020.0%
- 3Payout ratio($400,000 ÷ $500,000) × 10080.0%
- 4Ending retained earnings$1,200,000 + $100,000$1,300,000
Result Summary
Ending retained earnings
$1,300,000
Accounting Retention Rate Calculator
The company retains 20.0% of its net income and estimates ending retained earnings of $1,300,000.
Dividends exceeding current-period profit
Business using accumulated retained earnings to support distributions
Input Summary
Net income
$60,000
Dividends paid
$75,000
Beginning retained earnings
$400,000
Calculation Breakdown
- 1Retained earnings increase$60,000 − $75,000−$15,000
- 2Retention rate(−$15,000 ÷ $60,000) × 100−25.0%
- 3Payout ratio($75,000 ÷ $60,000) × 100125.0%
- 4Ending retained earnings$400,000 − $15,000$385,000
Result Summary
Ending retained earnings
$385,000
Accounting Retention Rate Calculator
The business has a −25.0% retention rate and estimated ending retained earnings of $385,000.
How to Read Your Results
The retention rate is the percentage of positive net income left after dividends.
The dividend payout ratio is the percentage of positive net income distributed as dividends.
For positive net income and dividends as the only distribution, retention rate and payout ratio add to 100.0%.
Retained earnings increase is a currency amount for the selected accounting period, not a cash-flow measure.
Ending retained earnings is an estimate of the closing equity balance based only on the inputs provided.
Assumptions & Important Notes
- Each example uses net income and dividends from the same period.
- All values are expressed in the same currency.
- The examples exclude prior-period adjustments, share repurchases, and transfers between equity accounts.
- Net income is assumed to be positive so percentage results can be interpreted directly.
Related Examples
Frequently Asked Questions
What does a 70% retention rate mean?
It means the business retains $0.70 of every $1.00 of positive net income after paying dividends.
What happens if no dividends are paid?
With positive net income, the retained earnings increase equals net income, the retention rate is 100.0%, and the payout ratio is 0.0%.
What does a 100% payout ratio mean?
It means dividends equal current-period net income. The calculated retained earnings increase and retention rate are both zero.
Why can payout ratio be more than 100%?
It occurs when dividends paid exceed positive net income for the period. The simplified calculation then shows a negative retained earnings increase.
Do these examples show cash available for dividends?
No. Retained earnings and net income are accounting measures. They do not by themselves establish the cash available for distribution.
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