A firm has paid out Rs. 150,000 as dividends from its net income of Rs. 250,000. What is the retention ratio for the firm?

A firm has paid out Rs. 150,000 as dividends from its net income of Rs. 250,000. What is the retention ratio for the firm?

A. 12%
B. 25%
C. 40%
D. 60%

Retention ratio = Net income – Dividend / Net income
= 250 – 150 / 250 = 0.4 or 40%