Ratio Analysis 2

Question 1

Explanation that would not effect A/R Turnover

Answer 1

Stolen Inventory

Cash Purchases

Question 2

Explanation for higher A/R turnover in current year than in prior year

Answer 2

Factoring without recourse - removes A/R (sold to bank). Decreases Denominator

Question 3

Explanation for lower A/R turnover in current year than in prior year

Answer 3

Fictitious credit sales have been recorded during the current year

Numerator and denominator increase by same amount.