Wax Music expects sales of $437,500 next year.The profit margin is 4.8 percent and the firm has a 30 percent dividend payout ratio.What is the projected increase in retained earnings?

Question

Quizplus · Accepted Answer

The projected increase in retained earnings is calculated by first determining the net income, which is sales multiplied by the profit margin ($437,500 * 4.8% = $21,000). Then, calculate the retained earnings by subtracting the dividends paid out from the net income. The dividends are 30% of the net income ($21,000 * 30% = $6,300). Therefore, the increase in retained earnings is $21,000 - $6,300 = $14,700.

Wax Music Expects Sales of $437,500 Next Year