Martin Aerospace Is Currently Operating at Full Capacity Based on Its

question 37

Multiple Choice

Martin Aerospace is currently operating at full capacity based on its current level of assets. Sales are expected to increase by 4.5 percent next year, which is the firm's internal rate of growth. Net working capital and operating costs are expected to increase directly with sales. The interest expense will remain constant at its current level. The tax rate and the dividend payout ratio will be held constant. Current and projected net income is positive. Which one of the following statements is correct regarding the pro forma statement for next year?

• A) The pro forma profit margin is equal to the current profit margin.
• B) Retained earnings will increase at the same rate as sales.
• C) Total assets will increase at the same rate as sales.
• D) Long-term debt will increase in direct relation to sales.
• E) Owners' equity will remain constant.

---

Definitions:

Piagetian Perspective

A theory of cognitive development proposed by Jean Piaget that describes how children construct knowledge through interactions with their environment, emphasizing stages of development.

Accommodation

Piagetian concept of adjusting schemes to fit new information and experiences.

Assimilation

Piagetian concept of the incorporation of new information into existing knowledge.

Equilibrium

A state of balance or stability within a system, achieved when opposing forces or influences are equal.