You Are Comparing a Current Income Statement and a Pro

question 204

Multiple Choice

You are comparing a current income statement and a pro forma income statement for a firm. The pro forma statement reflects a 7% rate of growth. Both income statements include a common-size
Statement. The firm is currently operating at 80 percent of its capacity. On the pro forma statement,
All costs increase at the same rate as sales. Given this,

• A) The net income shown on both statements is identical.
• B) The tax rate is assumed to increase at the same rate as the sales.
• C) Both common size income statements are identical.
• D) The projected increase in retained earnings is equal to the current increase in retained earnings.
• E) Total assets are required to also increase at a rate equal to the rate of sales growth.

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Definitions:

Job Satisfaction

The level of fulfillment, happiness, and contentment an employee feels towards their job.

Organizational Efficiency

The ability of an organization to implement its strategies and achieve its goals with minimum resources and waste.

Herzberg

Refers to Frederick Herzberg, a psychologist best known for developing the Motivation-Hygiene Theory, which distinguishes between factors that satisfy or dissatisfy employees in the workplace.

Responsibility

An obligation or duty to perform or complete a task with a level of care and competence.