Which of the Following Is a Limitation of the "Percent

question 70

Multiple Choice

Which of the following is a limitation of the "percent of sales method" of preparing pro forma financial statements?

• A) A firm's investment in accounts receivable is seldom related to sales volume.
• B) Not all assets and liabilities increase or decrease as a constant percent of sales.
• C) Inventory levels are seldom affected by changes in sales volume.
• D) The dividend payout ratio may change from one year to the next.

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Definitions:

Lack Of Construction

The absence or deficiency in building or assembling structures or ideas.

Fluctuating

Describes something that is changing frequently in level, strength, or value, often with no fixed pattern.

Differentiated

Tailoring education or activities to meet the different needs, interests, abilities, or learning styles of individuals or groups.

Contradictory

Involving or containing elements that are in opposition to each other; mutually incompatible.