For pro forma purposes, the Martin-Jones Company uses a 7.5% proﬁt margin and a 60 percent dividend payout ratio. Sales for next year are projected to be $267,000. What is the projected
Addition to retained earnings?

Question

Quizplus · Accepted Answer

Net income = $267,000 * 7.5% = $20,025Dividend payout = $20,025 * 60% = $12,015Addition to retained earnings = $20,025 - $12,015 = $8,010

For Pro Forma Purposes, the Martin-Jones Company Uses a 7