Tower Pharmacy pays out a fixed percentage of its net income to its shareholders in the form of annual dividends.Given this, the percentage shown on a common-size income statement for the dividend account will:
A)remain constant over time.
B)be equal to the dividend amount divided by the net income.
C)vary in direct relation to the net profit percentage.
D)vary in direct relation to changes in the sales level.
E)vary but not in direct relation to any other variable.

Question

Quizplus · Accepted Answer

The percentage shown on a common-size income statement for the dividend account will vary in direct relation to the net profit percentage because dividends are a fixed percentage of net income.

Tower Pharmacy Pays Out a Fixed Percentage of Its Net