B. 6.2 percent
C. 6.7 percent
D. 7.0 percent
E. 7.5 percent
Martin Aerospace is currently operating at full capacity based on its current level of
assets. Sales are expected to increase by 4.5 percent next year, which is the firm's
internal rate of growth. Net working capital and operating costs are expected to increase
directly with sales. The interest expense will remain constant at its current level. The
tax rate and the dividend payout ratio will be held constant. Current and projected net
income is positive. Which one of the following statements is correct regarding the pro
forma statement for next year?
A. The pro forma profit margin is equal to the current profit margin.
B. Retained earnings will increase at the same rate as sales.
C. Total assets will increase at the same rate as sales.
D. Long-term debt will increase in direct relation to sales.
E. Owners' equity will remain constant.
Which one of the following accurately describes the three parts of the Du Pont identity?
A. operating efficiency, equity multiplier, and profitability ratio
B. financial leverage, operating efficiency, and profitability ratio
C. equity multiplier, profit margin, and total asset turnover
D. debt-equity ratio, capital intensity ratio, and profit margin
E. return on assets, profit margin, and equity multiplier
Last month, Keyser Design acquired all of the assets and liabilities of Tenor Machine
Works. The combined firm is known as Keyser Design. Tenor Machine Works no
longer exists as a separate entity. This acquisition is best described as a: