Plowback Ratio (sometimes also retention ratio) is a term that refers to the size of profit reinvested back into the enterprise.
Plowback Ratio = 1 - Payout ratio, i.e.
Plowback Ratio = 1 - (Dividend / Net Earnings Per Share)
Use of the plowback ratio in practice: The ratio is used by the management of the enterprise and investors. The idea of the ratio is that the more earnings the enterprise retains, the more growth it can raise.
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