If a Firm's Pro Forma Statements Project a Net Income

question 66

Multiple Choice

If a firm's pro forma statements project a net income of $5,000,dividends of $2,000,and an external financing requirement of $2,000,then:

• A) The firm must issue new equity.
• B) The profit margin has declined.
• C) Total assets need to grow by $5,000.
• D) The internal growth rate is 15%.

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Definitions:

Legal Entities

Organizations that have legal rights and obligations, including the ability to enter into contracts and own assets.

Separate Accounting Entity

A fundamental accounting principle that treats a company's financial reports as distinct from those of its owners or other businesses.

Audit

A systematic examination of books, accounts, documents, and vouchers of an organization to ascertain how far the financial statements present a true and fair view.