Using the Percentage of Sales Method,forecasted Retained Earnings Balance Is

question 77

Multiple Choice

Using the percentage of sales method,forecasted retained earnings balance is equal to

• A) prior year retained earnings plus projected net income less projected dividends.
• B) the ratio of retained earnings to sales for the current year multiplied by projected sales for next year.
• C) the retained earnings balance for the current year as no changes are made to this financing account when using the percent of sales method.
• D) the ratio of retained earnings to sales for the current year multiplied by projected sales for next year, minus dividends paid.

---

Definitions:

Cost of Equity

The rate of return that a company is expected to pay out to its shareholders for their investment in the company, factoring in the risk of the investment.

Cost of Preferred

This refers to the required return on investment for preferred stock, representing the cost to a company for issuing such stock.

Pretax Cost of Debt

The interest rate a company pays on its debts, before taking taxes into account.

Cost of Equity

This refers to the rate of return that a company is expected to offer investors to compensate for the risk of investing in its equity.