Under Which of the Following Conditions Would the Percent-Of-Sales Method

question 56

Multiple Choice

Under which of the following conditions would the percent-of-sales method of financial forecasting be most accurate?

• A)If assets must be purchased in discrete quantities
• B)When asset requirements can be accurately forecasted as a constant percent of sales
• C)If economic circumstances beyond a firm's control drastically change from one year to the next
• D)When economies of scale can be realized from investing in specific assets

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Definitions:

Division Performance

An evaluation of the effectiveness and productivity of a specific division or segment within a company, often measured against pre-set targets or industry standards.

Return On Investment

A measure of the profitability of an investment relative to its costs, commonly expressed as a percentage.

Operating Assets

Assets used by a company to generate revenue, typically including property, plant, and equipment, but excluding investments and inventories.

Net Operating Income

The profit generated from a company's everyday business operations, indicating how much revenue exceeds both operating costs and overhead.