The percentage-of-sales technique is an effective method for a new company to estimate asset requirements because assets-to-liabilities ratios tend to be relatively constant within an industry.

Question

Quizplus · Accepted Answer

The percentage-of-sales technique may not be reliable for a new company as its ratios may not be comparable to established companies within the same industry. Additionally, changes in sales levels can significantly affect asset requirements, making projections based on this technique less reliable.

The Percentage-Of-Sales Technique Is an Effective Method for a New