Planners have determined that sales will increase by 20% next year,and the profit margin will remain at 10% of sales.Which one of the following statements is correct if the payout ratio remains at 30%?

Question

Quizplus · Accepted Answer

Since sales increase by 20% and the profit margin remains constant, net income will also increase by 20%. With a constant payout ratio, the addition to retained earnings, which is a portion of net income, will also increase by 20%.

Planners Have Determined That Sales Will Increase by 20% Next