You are comparing a current income statement and a pro forma income statement for a firm. The pro forma statement reflects a 7% rate of growth. Both income statements include a common-size statement. The firm is currently operating at 80 percent of its capacity. On the pro forma statement, all costs increase at the same rate as sales. Given this,

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EThe common-size income statements are identical because they express all items as a percentage of sales, which means the relative proportions remain the same even if the absolute figures change due to growth. Total assets needing to increase at a rate equal to the rate of sales growth is a logical assumption in many cases, especially if the company's operations are scaling up to support the increased sales volume, although this is not always a strict requirement but rather a common scenario in growth projections.

You Are Comparing a Current Income Statement and a Pro