Last Year, a Firm Had Net Income of $508,000 on Sales

question 60

Multiple Choice

Last year, a firm had net income of $508,000 on sales of $1,250,000. The projected sales for next year are $1,450,000. Assume the firm uses the percentage of sales method for pro forma statements. What is the projected net income?

• A)$589,280
• B)$599,390
• C)$639,200
• D)$650,500
• E)$701,900

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Definitions:

Current Ratio

An indicator of financial health showing whether a business can cover its short-term debts with assets that can be quickly converted into cash.

Acid-Test Ratio

A stringent indicator of a company's short-term liquidity, calculated by dividing liquid assets by current liabilities.

Times Interest Earned

This is a financial ratio that measures a company's ability to meet its debt obligations by comparing its interest expenses to its earnings before interest and taxes.

Gross Margin Percentage

A financial metric that indicates the proportion of money left over from revenues after deducting the cost of goods sold, expressed as a percentage of total revenue.