Tax retention rate = 1 - (dividends declared/operating income after tax) What is this for? I haven’t seen this in the curriculum for a while and can’t find it in Schweser!
Used as part of growth calculation G = ROE*Retention Rate. This is the sustainable growth rate for the company without using external financing.
This doesn’t sound right. Tax retention rate = NI/EBT = (EBT-T)/EBT = 1 - T/EBT.
I am sorry I blindly answered the post…assuming the retention rate that is being referred to is dividend retention rate. based upon the formula provided by rellison it is the dividend retention rate formula…however it refers to tax retention rate.
the rate of retention RR
net income NI
dividend D
RR=(NI-D)/NI
so the retention rate of tax is (NI-tax)/NI
[quote=“rellison, post:1, topic:39621”]
1 - (dividends declared/operating income after tax)
[/quote] = Earnings retention rate
Tax retention rate meaningless. Useullay referred to in tax codes when banks deduct tax before paying interest.