Assumptions underlying percentage of sales method, Finance Basics

Assumptions Underlying Percentage of Sales Method

The fundamental supposition underlying the use of % of sales method is such, there is no inflation in the economy such is the increase in sales is caused via increase in production and not increase in selling price.

Other assumptions contains as:

1. The firm is operating on full or 100% capacity.  Hence the increase in production will need acquisition of new fixed assets.

2. The firm wills not questioning new ordinary shares or preference or debenture shares so this capital will keep constant during the forecasting duration.

3. The relationship between balance sheet item and sales that is balance sheet items like % of sales will be kept during forecasting duration.

4. The after tax, net profit margin or profit on sale will be got and shall remain constant in the forecasting duration.

Posted Date: 1/30/2013 2:36:22 AM | Location : United States







Related Discussions:- Assumptions underlying percentage of sales method, Assignment Help, Ask Question on Assumptions underlying percentage of sales method, Get Answer, Expert's Help, Assumptions underlying percentage of sales method Discussions

Write discussion on Assumptions underlying percentage of sales method
Your posts are moderated
Related Questions
$1,000 of insurance had not been used up by January 31. $325 of insurance had been used up in January

The Beta of several industry sectors is shown below. Industry                                                                                            Beta (β) Banks

Opportunity Cost or Residual Loss It is the cost due to the failure of both parties to act optimally like as in example of A. Lost opportunities because of incapability to

Management of company and Directors They will consequently be interest in as: a) In generating profits efficiency of the company b) The company's capability to generate

1. The current interest rate is 6.83%. CanGo.com's stock has a beta of 2.0. Estimate the cost of equity. 2. CanGo.com has a bond with a semiannual coupon rate of 9% and 5 year m

Find the costs of financing for two schedules of monthly payments on a 25-year mortgage. The cash value of the house today is $500,000. You are paying monthly at a fixed rate of 6%

Profitability Index or P.I. P.I. (benefit-cost ratio) = Present value of inflows / Present value of cash outlay Whether P.I. is greater than 1.0, invest and whereas less th

Explain about the Internal Rate of Return Internal rate of return (IRR) is the rate of discount that makes the present value of all the revenues (cash flows) from the invest

Tarniwala and Dealer in Non-cleared Securities Tarniwala: He/she is a specialist or jobber in selected shares. He/she makes market i.e. provide continuity to dealings. They

continous time finaince expert