Limitation of the percent of sales method

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Reference no: EM13877878

Which of the following is a limitation of the “percent of sales method” of preparing pro forma financial statements?

A. Inventory levels are seldom affected by changes in sales volume.

B. A firm’s investment in accounts receivable is seldom related to sales volume.

C. Not all assets and liabilities increase or decrease as a constant percent of sales.

D. The dividend payout ratio may change from one year to the next.

Reference no: EM13877878

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