Which of the following is a limitation of the "percent of sales method" of preparing pro forma financial statements?

Question

Quizplus · Accepted Answer

The percent of sales method assumes that all assets and liabilities increase or decrease as a constant percent of sales, which is not accurate. Therefore, this method may not provide an accurate reflection of a company's financial position and performance. For example, some expenses such as rent or salaries may not vary proportionally with sales. Similarly, some assets such as inventory may need to be adjusted for obsolete or slow-moving products.

Which of the Following Is a Limitation of the "Percent