EARNINGS RETENTION Definition

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EARNINGS RETENTION is the proportion of net income that is not paid in dividends. A firm earning $80 million after taxes and paying dividends of $20 million has a retention rate of $60 million/$80 million, or 75%. A high retention rate makes it more likely a firms income and dividends will grow in future years.

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NORMALIZED EARNINGS is earnings that have been adjusted in order to take into account the effect of cycles in the economy.

ACCRUED EXPENSES are expenses incurred during an accounting period for which payment is postponed.

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