Which one of the following is correct in relation to pro forma statements?
-Fixed assets must increase if sales are projected to increase.
-Net working capital is affected only when a firm's sales are expected to exceed the firm's current production capacity.
-The addition to retained earnings is equal to net income less cash dividends.
-Long-term debt varies directly with sales when a firm is currently operating at maximum capacity.
-Inventory changes are not proportional to sales changes.
Answer: The addition to retained earnings is equal to net income less cash dividends