A Firm Has Net Income of $20,000 on Sales of $208,000

question 14

Multiple Choice

A firm has net income of $20,000 on sales of $208,000. Sales are expected to increase by 10 percent next year and the dividend payout ratio is 35 percent. The firm uses the percentage of sales approach when compiling pro forma statements. What amount is expected to be added to retained earnings next year?

• A) $14,300
• B) $15,400
• C) $15,686
• D) $22,000
• E) $26,600

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Definitions:

Limited Liability Company

A business structure that combines the pass-through taxation of a partnership with the limited liability protections of a corporation.

Managing Business

The process of organizing, planning, leading, and controlling the operations of a business to achieve its objectives.

Limited Liability Company

A business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability protections of a corporation.

Organizational Form

Refers to the structure and design of an organization, determining the hierarchy, communication flow, and allocation of responsibilities.