Forecasting a balance sheet with percent of sales method requires two passes-a first pass to determine financing needs and a second pass that shows the sources and amounts of financing.

Question

Quizplus · Accepted Answer

When using the percent of sales method to forecast a balance sheet, the first pass involves forecasting the various balance sheet accounts (assets, liabilities, and equity) based on a specified percentage of sales. The second pass involves determining the financing needs based on the total assets forecasted and then identifying the sources and amounts of financing required to meet those needs. Therefore, the statement in the question is true.

Forecasting a Balance Sheet with Percent of Sales Method Requires