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How assets and liabilities change with change in sales

(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 ___

Solution Preview

The current assets and spontaneous liabilities vary directly with sales since these are components of the working capital. Working capital is linked to the level of sales and so varies with the sales.
From the above, cash, ...

Solution Summary

The solution explains which elements of a balance sheet will change along with sales.