Under which of the following conditions would the percent-of-sales method of financial forecasting be most accurate?
A)If assets must be purchased in discrete quantities
B)When asset requirements can be accurately forecasted as a constant percent of sales
C)If economic circumstances beyond a firm's control drastically change from one year to the next
D)When economies of scale can be realized from investing in specific assets

Question

Quizplus · Accepted Answer

The percent-of-sales method assumes that asset requirements vary proportionally with sales. Therefore, it is most accurate when asset requirements can be accurately forecasted as a constant percent of sales.

Under Which of the Following Conditions Would the Percent-Of-Sales Method