A Weakness of the Percent-Of-Sales Method to Preparing a Pro

question 104

Multiple Choice

A weakness of the percent-of-sales method to preparing a pro forma income statement is

• A) the assumption that the values of certain accounts can be forced to take on desired levels.
• B) the assumption that the firm faces linear total revenue and total operating cost functions.
• C) the assumption that the firm's past financial condition is an accurate predictor of its future.
• D) ease of calculation and preparation.

---

Definitions:

Lanham Act

United States legislation that provides protection to trademarks and regulates unfair competition.

False Advertising

The act of misleading consumers through deceptive, incorrect, or misrepresented information in advertisements.

Installment Contract

Under the Uniform Commercial Code, a contract that requires or authorizes delivery in two or more separate lots to be accepted and paid for separately.

Truth-In-Lending Act

A federal law designed to promote informed use of consumer credit by requiring disclosures about its terms and cost.