Which of the Following Assumptions Is Not Required by the Percent

question 100

Multiple Choice

Which of the following assumptions is not required by the percent of sales method?

• A) The inventory turnover will remain constant during the forecast period.
• B) The profit margin will remain constant during the forecast period.
• C) Cash, as a percent of sales, will remain constant throughout the forecast period.
• D) The debt to equity ratio will remain constant throughout the forecast period.

---

Definitions:

Direct Method

The direct method in accounting refers to a way of reporting cash flows from operating activities by directly listing major classes of gross cash receipts and payments.

Indirect Method

A technique used in cash flow statement preparation where net income is adjusted for non-cash transactions and changes in working capital to arrive at operating cash flow.

Financing Activity

Transactions and events where cash is raised or repaid to investors, such as issuing stock, borrowing money, or paying dividends.

Treasury Stock

Shares of a company's own stock that it has reacquired from shareholders and are not currently outstanding.