A firm that is currently operating at 100% of capacity has an increase in sales. For every percentage increase in sales, the same percentage increase will be needed in current assets and current liabilities.

Question

Quizplus · Accepted Answer

An increase in sales for a firm operating at 100% capacity may not lead to the same percentage increase in current assets and current liabilities. The relationship between sales and these balance sheet items is not directly proportional, as it depends on the firm's operational efficiency, credit terms, inventory management, and other factors.

A Firm That Is Currently Operating at 100% of Capacity