Financial PlanningThe percent of sales model uses historical information to develop certain ratios such as sales to inventory or finished products, sales to debtors/receivables, and sales to cash. Sales are then forecasted based on the ratios.

Financial PlanningThe percent of sales model uses historical

information to develop certain ratios such as sales to inventory or finished products, sales to debtors/receivables, and sales to cash. Sales are then forecasted based on the ratios. The percent of sales model is a financial planning model that assumes that most income statement and balance sheet accounts vary proportionally with sales.  This model has a weakness related to working capital. What is this weakness and how does it affect financial planning?

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