The Strict Application of the Percent-Of-Sales Method to Prepare a Pro

question 155

Multiple Choice

The strict application of the percent-of-sales method to prepare a pro forma income statement assumes the firm has no fixed costs. Therefore, the use of the past cost and expense ratios generally tends to ________ profits when sales are increasing.

• A) accurately predict
• B) overstate
• C) understate
• D) have no effect on

---

Definitions:

Russian Stocks

Russian stocks are shares issued by companies based in Russia, traded on the Russian stock market or internationally, and are influenced by the country's economic and geopolitical developments.

Technical Analysis

The study of past market data, primarily price and volume, to forecast future price movements.

Security Prices

The monetary value assigned to a security (such as a stock, bond, or derivative) in a marketplace, determined by supply and demand dynamics.

New Information

New information refers to previously unknown data or insights that become available, often affecting decision-making, market movements, or scholarly research.