Test 1 (on Chst to 4)-Part 1 (Tme. Help Seve & Exi If we assume thatand its sale

Question

Test 1 (on Chst to 4)-Part 1 (Tme. Help Seve & Exi If we assume thatand its sales forecast for next year is 15 percent, its pro forma income statement and balance sheet for next year should indicate that both sales and fixed assets are projected to increase by 15 percent above their current levels Multiple Choice n frm cumently has excess capacity a frm is currernly operating at ts full copacity firm is growing at its internel growth rate frm etnins all of its net income TOSHIBA 6 7 8 9 0 ERTY UOP 7 D FGHJK L ENTER 4, ALT CTRI

Explanation / Answer

Answer: b. a firm is currently operating at its full capacity.

If the fixed assets are to increase by 15 % as a result of a 15% increase in sales, the firm is obviously operating at its full capacity. If the firm had excess capacity, an increase in sales would not necessitate an increase in fixed assets.

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