Revenue recognition and activity timing practices need to be investigated to ensure that revenue is not being reported before the completion of the earnings cycle (Ebert, Griffin, 2019). This will allow management to review the amount of revenue received in comparison to the expenses incurred.

It would also be a good idea to make sure the company is not purchasing considerably more inventory than it needs. Of course, no one likes a shortage, but if the company has too much inventory sitting on the floor, it could lead to cash flow problems because cash is sitting in storage in the form of unused or unsold inventory when the company needs the cash to pay bills.

Another point is that it is often best to pay bills first. Perhaps it may be best to purchase a smaller amount of new inventory after first paying outstanding bills. This could result in improved credit ratings and less sitting inventory.

Agree or Disagree and why?

Answer rating: 100% (QA)

I Agree with the given statements It is important to investigate and analysize the timings to revenu... View the full answer