The Percentage-Of-Sales Technique Is an Effective Method for a New

question 70

True/False

The percentage-of-sales technique is an effective method for a new company to estimate asset requirements because asset-to-liabilities ratios tend to be relatively constant within an industry.

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Definitions:

Variable Costs

Charges that adjust based on the volume of sales or production levels.

Fixed Costs

Expenses that do not change as a function of the activity of a business, within the relevant period.

Break-Even Point

The level of sales at which total revenues equal total costs, resulting in no net loss or gain.

Sales Mix

The composition of a company’s product or service sales, showing the relative proportions of each product or service sold.