Next Year's Pro Forma Statement Is Based on an Annual

question 76

Multiple Choice

Next year's pro forma statement is based on an annual increase in sales of four percent. The firm is currently operating at 85 percent of capacity. Net working capital and all costs vary directly with sales. The tax rate and the dividend payout ratio are fixed. Given this information, the:

• A) projected dividends must equal the current dividends.
• B) depreciation expense will decrease by four percent.
• C) retained earnings will increase by 85 percent of projected net income.
• D) total assets will increase by less than four percent.
• E) total liabilities and owners' equity will increase by four percent.

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Definitions:

Labor Relations

The relationships and interactions between employers, employees, and their representatives, often within the context of negotiation and collective bargaining.

Collective Bargaining Process

The procedure where employers and representatives of employees negotiate labor contracts concerning wages, hours, benefits, and working conditions.

Collective Bargaining Agreements

Legally binding agreements between employers and a group of employees, often negotiated by a union, that specify wages, hours, and other terms and conditions of employment.

Collective Bargaining

The process by which employers and unions negotiate employment terms such as wages, hours, and conditions.