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When Using the Percentage of Sales Approach to Calculate the External

question 62

Essay

When using the percentage of sales approach to calculate the external financing need,some accounts are assumed to vary in direct proportion to sales while others do not.For each of the following accounts,explain how they are generally expected to change using this approach:


Definitions:

E(XY)

The anticipated outcome of multiplying two stochastic variables together, showing how their variances are interconnected.

COV(X,Y)

A measure of the degree to which two variables X and Y move together, indicating the strength and direction of their linear relationship.

Marginal Probability

The probability of an occurrence of a single event without consideration of any other events.

Coefficient of Correlation

A quantitative gauge assessing the force and trajectory of a linear linkage between a pair of elements.

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