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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