Calculate the most recent retention ratio for a firm

Can you calculate the most recent retention ratio for a firm?

The firm reported EPS of $4.47 and paid $1.83 per share in dividends during the most recent fiscal year.

Answer:

Yes, I can help you calculate the most recent retention ratio for the firm based on the provided information.

In order to calculate the most recent retention ratio for the firm, we need to determine the earnings retained by the company. This can be done by subtracting the dividends per share from the earnings per share and dividing the result by the earnings per share.

First, we calculate the dividends per share which is $1.83. Next, we find the earnings per share (EPS) which is $4.47. Now, we can calculate the retention ratio:

Retention ratio = (EPS - dividends per share) / EPS

= ($4.47 - $1.83) / $4.47

= $2.64 / $4.47

= 0.5908

To convert this ratio into a percentage, we multiply by 100:

Retention ratio = 0.5908 * 100 = 59.08%

Therefore, the most recent retention ratio for the firm is 59.1%. This means that the firm retained 59.1% of its earnings rather than distributing them as dividends to shareholders.