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:

Russia

A country in Eurasia, the world's largest by land area, known for its significant contributions to arts, science, and global politics, as well as its rich cultural heritage.

Time Frames

Specific periods within which certain activities are scheduled to occur or objectives are meant to be achieved.

Top Management

The highest level of organizational management, including positions such as CEO, CFO, and other senior executives responsible for overall strategic direction and decision-making.

Longer-term Plans

Strategic objectives or projects that are intended to be achieved over an extended period of time.