If a Firm Determines It Can Use the Percentage-Of-Sales Method

question 6

Multiple Choice

If a firm determines it can use the percentage-of-sales method and it follows the procedure described in the textbook, then the net result is that each expense item on its income statement (with the exception of those items that can be individually forecast) will grow at the same rate as sales. This approach is called the ________.

• A) continuous percentage method of forecasting
• B) stable fraction method of forecasting
• C) regular proportion method of forecasting
• D) constant ratio method of forecasting
• E) steady percentage method of forecasting

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Definitions:

American Recovery

A reference to the efforts, policies, and programs aimed at recovering from economic downturns in the United States, like the response to the 2008 financial crisis.

Discretionary Fiscal Policy

Government policy that involves changing tax rates and levels of government spending to influence the economy.

Reinvestment Act

A law enacted to reallocate or invest funds into sectors or projects deemed necessary for economic recovery or development.

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The total amount of public funds that a government expends on its programs, services, and investments.