When compiling a pro forma statement, which policy most directly affects the projection of the retained earnings account balance?
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 retained earnings account balance is affected by the dividend policy, as any profits that are not distributed to shareholders as dividends are added to the retained earnings account. Therefore, changes in dividend policy can directly impact the projection of the retained earnings account balance in a pro forma statement.

When Compiling a Pro Forma Statement, Which Policy Most Directly