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

Question

Quizplus · Accepted Answer

The dividend policy directly affects the projection of the retained earnings balance on a pro forma statement as retained earnings represent the portion of earnings that the company has decided to retain instead of paying out to shareholders as dividends. A higher dividend payout will result in a lower retained earnings balance, while a lower dividend payout will result in a higher retained earnings balance. Therefore, the dividend policy has a direct impact on the projection of the retained earnings balance on a pro forma statement. The other policies listed may indirectly affect the retained earnings balance, but not as directly as the dividend policy.

Which One of the Following Policies Most Directly Affects the Projection