Question

​(Percent

of sales

forecasting​)

Which of the following accounts would most likely vary directly with the level of a​ firm's sales? Discuss each briefly.

	Yes	No		Yes	No
Cash	​____	​____	Notes payable	​____	​____
Marketable securities	​____	​____	Plant and equipment	​____	​____
Accounts payable	​____	​____	Inventories	​____	​____

Is cash likely to vary directly with the level of a​ firm's sales?  ​(Select the best choice​ below.)

A.

​Yes, cash receipts vary directly with sales and have a relation to the​ firm's customers payment habits or the​ firm's policy regarding payments on its accounts payable.

B.

​No, cash receipts follow sales with a lag related to the payment habits of the​ firm's customers and the​ firm's policy regarding payments on its accounts payable.

Are marketable securities likely to vary directly with the level of a​ firm's sales?  ​(Select the best choice​ below.)

A.

​Yes, the value of marketable securities varies directly with sales.

B.

​No, marketable securities are not related to sales.

Is accounts payable likely to vary directly with the level of a​ firm's sales?  ​(Select the best choice​ below.)

A.

​No, accounts payable will not vary directly with sales.

B.

​Yes, accounts payable will vary directly with sales.

Is notes payable likely to vary directly with the level of a​ firm's sales?  ​(Select the best choice​ below.)

A.

​Yes, notes payable is likely to vary directly with sales.

B.

​No, notes payable will only follow sales if the firms uses a line of credit to finance its working capital needs.

Is plant and equipment likely to vary directly with the level of a​ firm's sales?  ​(Select the best choice​ below.)

A.

​No, plant and equipment is not likely to vary directly with the level of sales.

B.

​Yes, plant and equipment is likely to vary directly with the level of sales.

Are inventories likely to vary directly with the level of a​ firm's sales?  ​(Select the best choice​ below.)

A.

​Yes, inventories are likely to vary directly with the level of sales.

B.

​No, inventories are not likely to vary directly with the level of sales.

Answer 1

1) Is cash likely to vary directly with the level of a​ firm's sales?

answer-Yes, cash receipts vary directly with sales and have a relation to the​ firm's customers payment habits or the​ firm's policy regarding payments on its accounts payable.

2)Are marketable securities likely to vary directly with the level of a​ firm's sales?

Answer- No, marketable securities are not related to sales.AS they totally depends on demand and supply concept.Any change in the value of marketable securities is due to increase or decrease in demand and increase or decrease in supply.

3) Is accounts payable likely to vary directly with the level of a​ firm's sales ?

Answer: Yes, accounts payable will vary directly with sales.As we have purchase more inventory if there is increase in level of firm sales due to which account payable also keeps on increasing.

4) Is notes payable likely to vary directly with the level of a​ firm's sales?

Answer- No, notes payable will only follow sales if the firms uses a line of credit to finance its working capital needs.

5) Is plant and equipment likely to vary directly with the level of a​ firm's sales?

Answer- Yes, plant and equipment is likely to vary directly with the level of sales.Firstly due to increase or decrease in level of sales the number of working hours of machinery will also change for eg it will take 2 hrs for making 100 units and as we increase the level to 200 units time to make these unit will also change and also level of sales may decide whether additional machinery is required or not.

6) Are inventories likely to vary directly with the level of a​ firm's sales?

Answer- Yes, inventories are likely to vary directly with the level of sales. As if the level of sales changes cost of inventory also changes.