Final answer:
Not all increases in sales require new funds; it depends on how the balance sheet accounts like assets, liabilities, and equity are affected.
Step-by-step explanation:
When using the percent-of-sales method in forecasting the funds needed, it is not true that required new funds automatically increase as sales increase. This method assumes that there is a direct relationship between sales and certain balance sheet accounts, meaning as sales increase, the assets needed to support these sales also increase, and so may the liabilities and equity.
However, whether the required new funds will increase depends on the exact relationship between sales and the various balance sheet accounts. For instance, if the increase in sales can be supported by the existing assets, or if the liabilities grow proportionally to cover the increased assets, the need for additional external funding might not increase.