Which of the Following Is Untrue of the Percent-Of-Sales Method

question 82

Multiple Choice

Which of the following is untrue of the percent-of-sales method?

• A) It is much easier than tracing through various cash flows to arrive at the pro forma statements.
• B) It is a broad-brush approach when compared to developing pro forma statements.
• C) The output is less meaningful because it doesn't give the month-to-month breakdown of data when compared to pro forma statements.
• D) Changes in sales levels is not an important aspect of this method.

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Definitions:

Absolute Advantage

The capacity of an entity to create a product or offer a service more effectively than its rivals, utilizing fewer resources.

Absolute Advantage

A country's ability to produce a certain good more efficiently than another country can.

Comparative Advantage

The ability of an entity to produce a good or service at a lower opportunity cost than others, enabling trade and increased efficiency.

Trade Better Off

The idea that parties involved in voluntary trading are better off as they satisfy each other's needs or wants.