The percent of sales method provides a more detailed plan for future financing needs than the cash budget because both pro forma income statements and balance sheets are used in the analysis. True False

Question

Clare Shields

Business

29 October, 18:02

The percent of sales method provides a more detailed plan for future financing needs than the cash budget because both pro forma income statements and balance sheets are used in the analysis. True False

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Melissa · Answer 1

The correct answer is False.

Explanation:

In online advertising, it is the amount of money an advertiser pays for each click that a given ad receives. In other words, the advertiser pays the publisher for each valid click that a visitor or user makes on the advertising provided by the advertiser.

It is based on the sales of the previous year and balance of the previous year and shows the additional financing that the company will need if its sales increase from one period to another.

The percentage of sales method is a method of financial forecasting that consists in expressing the needs of the company in terms of the percentage of annual sales invested in the balance sheet item in order to determine short-term financial needs.

Convert the accounts used in the balance sheet for the percentage of sales method to predict sales in a percentage of the sales for the current year. The accounts you need to convert include cash, accounts receivable, inventory, retained earnings and fixed assets on the active side of the balance sheet. To make this conversion, divide the total of each account by the total sales for the current year. This will result in each account showing a percentage based on this year's sales.

It is a factor that we multiply by 100, to be expressed as a percentage of the Asset with the Liabilities, and thus it gives us the amount of financing that the company needs, either from internally generated funds or from external sources.