(Answered) The percentage of sales model takes into account the

Management Studies

The percentage of sales model takes into account the current assets to sales, and the current liabilities to sales only. The weakness in using the percent of sales model for financial planning is that the projected working capital is based off of the percentages of sales for current assets and current liabilities from a previous financial period. The inflexibility of this model is its true weakness in that current assets and liabilities are not fixed, and can grow or decrease (non linearly) at any given point in time based off of any unknown external influences which would or could change the actual percentage of sales model for the current financial period.

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