Which one of the following policies most directly affects the projection of the retained earnings balance to be used on a pro forma statement?
A) net working capital policy
B) capital structure policy
C) dividend policy
D) capital budgeting policy
E) capacity utilization policy
F) None of the above.

Question

Quizplus · Accepted Answer

The retained earnings balance on a pro forma statement is affected by the dividend policy of the company because it determines the amount of earnings that will be retained in the business rather than paid out to shareholders as dividends. A higher dividend payout ratio will result in lower retained earnings, while a lower dividend payout ratio will result in higher retained earnings. Therefore, the dividend policy directly affects the projection of the retained earnings balance on a pro forma statement.

Which One of the Following Policies Most Directly Affects the Projection