Profit Retention Formula

Profit Retention Formula

Profit retained may be calculated by deducting dividend from the post tax profit during the year. This concept can be explained with following example

Example

Post Tax Profit =60,000

Dividend Paid = 20,000

Calculate Profit Retained & profit retained proportion?

Solution

Profit Retained Amount = Post tax Profit – Dividend

=60,000-20,000

=40,000

Profit Retained Proportion = 40,000/60,000

= 66.66%

Profit Gross up Formula

Profit Gross up Formula

Profit can be grossed up by the following formula. This concept is widely used in taxation, where profit is grossed up for the purpose of taxation.

Amount to be grossed up/ (1-Gross up Rate)

Example

Profit = 150

Rate of Grossing up= 30%

Calculate Gross up profit

Solution

Amount to be grossed up/ (1-Gross up Rate)

= 150/ (1-.3)

= 150/.7

= 214.28