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What are the pros and cons of using the percentage of sales method to create pro forma financial statements?
Wiki User
∙ 13y ago
It forecasts sales and then expresses the various income statement items as percentage of projected sales. It assumes that the firm's cost and expenses are variable. This approach implies that the firm will not receive the benefit that result from fixed costs, when sales are increasing. There for profits can be understated with sales is increasing, but overstates profits when sales are decreasing. Depending on which way you look at it, tax break, or making the company look profitable this can be
Wiki User
∙ 13y ago
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