Percentage of sales method - financial forecasting, Finance Basics

Percentage of Sales Method - Financial Forecasting

This method includes expressing various balance sheet items such are directly concerned to sales as a percentage of sales.  It includes the following steps like:

  1. Recognize various balance sheet items such are directly via sales this items comprises with:

a) Net fixed asset - If the current production capacity of the firm is full an increase gradually in sales will necessitate acquisition of new assets as machinery to raise production.

b) Current Asset - An increase in sales because of increased production will lead to increase in stock of raw materials, work and finished goods in progress. Increased credit sales will increase debtors whereas more cash will be necessary to buy more raw materials in cash.

c) Current liabilities - Increased sales will show to purchase of more raw materials

d) Retained earnings - This will increase along with sales whether and only whether, the firm is operating profitability and all net profits are not paid out like dividend.


The increase in sales does not need an increase in ordinary share capital, preference share capital and debentures because long term capital is used to finance long term project.

Posted Date: 1/30/2013 2:30:18 AM | Location : United States

Related Discussions:- Percentage of sales method - financial forecasting, Assignment Help, Ask Question on Percentage of sales method - financial forecasting, Get Answer, Expert's Help, Percentage of sales method - financial forecasting Discussions

Write discussion on Percentage of sales method - financial forecasting
Your posts are moderated
Related Questions
Advantage of Bill - Source of Finance Advantages of necessitating a Bill as a Source of Finance They are a faster means of raising finance whether drawer is credible.

Explain about the functions of financial systems. Financial systems perform the necessary economic function of channelling funds through units who have stored surplus funds to

what is the applicability of a financial cycle to poultry?

Profit maximization - Objectives of Business Entity Conventionally, this was considered to be the main goal of the firm. Profit maximization refers to getting the highest poss

Define New Issue Market New Issue Market OR Primary Market New issue market is the segment in which new issues are made.

Benefits Ordinary Share Capital - Financing Benefits of using ordinary share capital in the financing They facilitate projects particularly long-term projects since they

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

Assume the managers of Fort Winston Hospital are setting the price on a new outpatient service. Here are the relevant data estimates. Variable costs $ 5.00 Annual fixed c

Ask question #Minimum what are the challenges that a finance manager may face?

After carefully reading all the available information, prepare a two page (double-spaced) essay and answer the following questions: Assume that we have the following data: C=100+0.