Plowback Ratio

You know those rumors about Leonardo DiCaprio and all the models he dates? One kind of plowback ratio. Another has to do with corporate investment strategy.

The figure demonstrates what portion of a firm's earnings get held by the company. Or, to put it another way, how much of the profit gets plowed back into the firm, as opposed to sent out to shareholders in the form of dividends.

Basically, a company has two choices when it has profits: keep them, or give them back to shareholders. The ratio of money kept to money earned becomes the plowback ratio (or the retention ratio, as it's sometimes called). The other side of the coin is the payout ratio: the ratio of dividends to money earned.