You are a senior staff member of a public accounting firm, and you have been asked by

Question:

You are a senior staff member of a public accounting firm, and you have been asked by one of the firm's partners to discuss the impact of improper accounting practices on the of a company to new junior staff accountants. Using the information given in Problem 18-1C , use the following questions to frame your comments to the new juniors.
Required
1. Sales grew faster than receivables. Would this situation create an unusually high or unusually low turnover?
2. Why was the fact that sales grew faster than receivables relative to other companies in the industry a "red flag"?
3. Explain why inventory turnover was too low.
4. Why was the fact that inventory turnover was low relative to other companies a "red flag"?
5. Compare the company's receivables turnover with inventory turnover. Does the comparison suggest a "red flag"? If so, what is it?
Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...