Which One of the Following Statements Is True Concerning the Construction

question 75

Multiple Choice

Which one of the following statements is true concerning the construction of pro forma statements using the percentage of sales approach?

• A) The profit margin tends to vary considerably.
• B) The dividend dollar amount is held constant.
• C) Long-term debt is held as a constant percentage of sales.
• D) Retained earnings vary directly with sales.
• E) Inventory generally varies directly with sales.

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Definitions:

Demand Curve

A graphical representation in economics showing the relationship between the price of a specific good and the amount of it that consumers are willing and able to purchase at various prices.

Supply Curve

The supply curve graphically represents the relationship between the price of a good and the quantity supplied by producers over a specific time period.

Market

A system or place where parties engage in exchange of goods, services, or information, characterized by supply and demand.

Positive Externality

A benefit that is enjoyed by a third-party as a result of an economic transaction in which they had no direct involvement.