Introduction to Finance

corporate retention rate 
calculated as undistributed profi ts 
divided by profi ts after taxes
capital consumption adjustment 
estimate of the “using up,” or 
depreciation, of plant and equipment 
assets for business purposes
TA B L E 7 . 4
Personal Savings in the United States ($ Billions)
2006
2009
2012
2015
Personal income
$11,393.9
$12,094.8
$13,915.1
$15,340.4
Less: personal current taxes 
1,375.1
1,152.3
1,512.3
1,945.4
Disposable personal income
10,036.9
10,942.5
12,403.7
13,395.0
Less: personal outlays
9,705.5
10,275.1
11,457.0
12,717.5
Personal savings
331.4
667.4
946.7
677.5
Savings rate (personal savings/
disposable personal income)
3.3%
6.1%
7.6%
5.1%
Source: U.S. Department of Commerce, Bureau of Economic Analysis, http://www.bea.gov.

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7.4 Factors Aff ecting Savings
177
accommodate the increased levels of operating assets. Quarterly corporate income tax liabil-
ities also impose the necessity of accumulating fi nancial assets. 
The short-term accumulation of fi nancial assets on the part of business corporations does 
not add to the level of long-term savings of the economy as a whole. However, these funds 
do enter the monetary stream and become available to users of short-term borrowed funds. 
As such, these short-term savings serve to meet a part of the demand for funds of consumers, 
government, and other businesses. A corporation, typically, holds this type of savings in the 
form of checkable deposits with commercial banks, short-term obligations of the federal gov-
ernment, commercial paper, and certifi cates of deposit issued by commercial banks. These 
fi nancial assets meet the requirements of safety and liquidity.
Corporations also engage in the savings process to meet planned spending in the future. 
Reserves are often set up to provide all or part of the cost of construction, purchase of equip-
ment, or major maintenance and repairs to existing facilities. Savings committed to these pur-
poses are often invested in securities that have longer maturities and higher yields than those 
held for short-term business purposes. These securities include the debt obligations of both 
corporations and government and, to a limited extent, corporate stock.