Question

The percent-of-sales method assumes that all accounts on the balance sheet change in some fixed proportion...

The percent-of-sales method assumes that all accounts on the balance sheet change in some fixed proportion to changes in sales.

TRUE or FALSE

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Answer #1

ANSWER

TRUE

EXPLANATION : The "percent of sales" method is basically a financial forecasting technique whose crux is that Balance Sheet and Income Statement Accounts changes in some proportion to changes in sales.

So by calculating that "fixed proportion" we are able to make proforma financial statements and budgets by multiplying that "fixed ratio" with the estimated sales of future years.

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