What is the level of preservation?
In terms of financing, the storage rate is customized or the amount of earnings that the company keeps after the investors has settled any dividend payments. This percentage, sometimes known as the retention ratio or the ratio of the plowback, reflects the net income of the company that remains in the holding of the company as soon as the dividends are paid. The rate is usually presented as a percentage.
The process for determining the preservation rate is very simple because the number is related to net income rather than gross income. This means that the taxes have already been deducted from the amount of revenue used to determine the ratio of the plowback. From there, it is simply a question of deducting the total dividends that are paid to investors for the considered period, and the division of this number by net income.
For example, if a company generates $ 10 million in the US (USD) in net receipt and pays dividends $ 1 million, it is a dividends to leave $ 9 million as a net income. By distributing the amount remaining after dividends pure forIt is possible to find out that the company has experienced the level of storage of 90%, the number than many companies would consider it highly desirable.
The aim of most companies is to realize the highest possible degree of retention and at the same time to provide investors with dividends that are considered attractive and fair by these investors. If the company is able to achieve this balance, there is more money to draw back to strengthening existing operations or expanding business by introducing the presence in the new market, financing of research and development processes. Make sure that there is a significant amount of net income for this purpose, it is possible to set steps that will ultimately benefit the company's owners and investors.
If the company experiences a relatively low level of retention, steps are usually taken to identify the reasons for a bland percentage. This can lead to changes in the manufacturing process usedCompany, evaluation of the cost of raw materials used in this production or reorganization of the corporate structure to eliminate positions that are considered obsolete or unproductive. Here is the idea of shortening costs without adversely affecting the quality of products offered to consumers, thus increasing the amount of net income that is generally generated.