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    hotordychick24's Avatar
    hotordychick24 Posts: 1, Reputation: 1
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    #1

    Aug 18, 2009, 11:51 AM
    Percent of sales method
    Use the percent of sales method to forecast next yera's accounts payable.

    Current year sales are $24,500,000 and sales are expected to rise by 25%. The firm's accounts payable balance is $1,701,600. What is the projection for next year's accounts payable?
    ArcSine's Avatar
    ArcSine Posts: 969, Reputation: 106
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    #2

    Aug 18, 2009, 12:23 PM
    Hot, lukewarm, or cold as Haagen Dazs... ya still got to read and comply with the homework help rules first.
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
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    #3

    Aug 18, 2009, 06:19 PM

    What exactly does sales have to do with accounts payable?
    ArcSine's Avatar
    ArcSine Posts: 969, Reputation: 106
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    #4

    Aug 19, 2009, 04:58 AM
    It's one of those "high altitude" analyses that an analyst might perform on a company when only limited data is available. It applies when there's a demonstrated correlation between a company's sales level, and its AP balances.

    Similar to forecasting inventory levels, or PP&E needs, e.g. when those items tend to maintain a particular size relationship vis-à-vis sales. I.e. More Sales = Larger Company = Larger Balance Sheet Items.

    Just for a back-of-the-cocktail-napkin calculation, when better AP forecasts aren't available.
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
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    #5

    Aug 19, 2009, 11:26 PM

    So now you know why I don't answer many finance questions. LOL.
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