Financial Management: Preparing Income Statements
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Consider the following income statement for the Heir Jordan Corporation:
HEIR JORDAN CORPORATION
Income Statement
Sales $43,800
Costs 34,800
Taxable income $9,000
Taxes (35%) 3,150
Net income $5,850
Dividends $3,300
Addition to retained earnings 2,550
The projected sales growth rate is 12 percent.
Prepare a pro forma income statement assuming costs vary with sales and the dividend payout ratio is constant.
HEIR JORDAN CORPORATION
Pro Forma Income Statement
Sales $
Costs
Taxable income $
Taxes
Net income $
What is the projected addition to retained earnings?
Retained earnings $
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Solution Summary
Solution prepares a pro forma income statement with the help of given projections. It also calculates the net addition to the retained earnings.
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Payout Ratio=3300/5850=56.41%
Pro Forma Income Statement
Sales 43800*(1+12%) ...
Education
- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India
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