Profit retention refers to withdrawing part of the total profit or part of the total profit realized by the enterprise in a prescribed proportion for the enterprise's use.

Profit retention rate = (Profit after tax – Dividends payable)/Profit after tax × 100%.

What is profit retention?

Profit retention refers to withdrawing part of the total profit or part of the total profit realized by the enterprise in a prescribed proportion for the enterprise's use.

The relevant calculation of profit retention is: Profit retention rate = (Profit after tax - Dividends payable) / Profit after tax × 100% The profit retention rate indicates how much of the company's after-tax profit is used to distribute dividends, or to expand operations and retain earnings.

The higher the indicator, the more the company pays attention to later development and will not affect the development of the company due to excessive dividends; conversely, the lower indicator indicates that the company's production and operation are poor and more profits are needed to make up for losses, or too many dividends are paid.

, development potential is limited.

The relationship between profit retention rate and dividend payout rate. The profit retention rate indicates how much of the company's after-tax profits are used to issue dividends, or to expand operations and retain earnings. Profit retention rate = (profit after tax - dividends payable) / profit after tax ×

100%; dividend payout ratio, also called dividend payout rate, refers to the proportion of dividends in net income, reflecting the company's dividend distribution policy and dividend payment ability.

Dividend payout ratio = total dividends ÷ total net income × 100%, or dividend payout ratio = dividends per share ÷ net income per share × 100%.

The relationship between the two is: dividend payout rate + retained earnings rate = 1.

The difference between retained earnings and profit retention. Retained earnings refer to the accumulation that an enterprise extracts or forms from the net profits realized over the years and remains within the enterprise. It includes two parts: surplus reserve and undistributed profits. What an enterprise obtains from its production and operations remains in the enterprise.

The profits that have not yet been distributed to shareholders in the form of dividends are accumulated by the company over the years, and are also called accumulated capital; profit retention refers to the amount of total profits or part of the profits realized by the company, which is withdrawn in a prescribed proportion and reserved for the company's use.