When utilizing the percentage of sales approach, managers can ignore any projected dividends.

Question

Quizplus · Accepted Answer

In the percentage of sales approach, projected dividends are considered because they affect the financing needs of the company. This approach involves forecasting sales and then estimating various income statement and balance sheet items as a percentage of sales, including dividends, which impact retained earnings and thus the equity financing requirements.

When Utilizing the Percentage of Sales Approach, Managers Can Ignore