Suppliers, Inc. has current sales of $2,400 and a proﬁt margin of 9%. The ﬁrm estimates that sales will decrease by 4% next year and that all costs will vary in direct relationship to sales. What is the
Pro forma net income?

Question

Quizplus · Accepted Answer

The current sales are $2,400 with a profit margin of 9%, resulting in a current net income of $216. With a 4% decrease in sales, the new sales figure is $2,304. Applying the 9% profit margin to the new sales gives a pro forma net income of $207.36.