Final answer:
The percent-of-sales method is a financial forecasting technique where certain financial statement items are projected to increase proportionally with sales. For an electronics retailer using a regression model, the sales prediction for day 60 would be $250,120, and for day 90, it would be $324,520.
Step-by-step explanation:
The percent-of-sales method of financial forecasting is used to forecast future financial statements based on the assumption that certain costs and expenses will vary with sales. Specifically, it is option 1: A method used to forecast financial statements based on a percentage of sales. In other words, it assumes certain financial statement items, such as cost of goods sold and certain operating expenses, will increase in direct proportion to the increase in sales revenue. This method helps businesses to predict future revenue, costs, and cash flows by extrapolating past percentages into future projections.
For example, the given regression model to predict sales growth of an electronics retailer can be utilized. On day 60, using the model ŷ = 101.32 + 2.48x, the prediction would be:
ŷ = 101.32 + 2.48(60)
ŷ = 101.32 + 148.8
ŷ = 250.12 (in thousands of dollars)
For day 90, the calculation would be:
ŷ = 101.32 + 2.48(90)
ŷ = 101.32 + 223.2
ŷ = 324.52 (in thousands of dollars)