If a company attempts to artificially inflate current sales and net income by shipping goods that have not been ordered,we would expect that the receivables turnover ratio will:
A)rise and the days-to-collect will rise,all other things equal.
B)rise and the days-to-collect will fall,all other things equal.
C)fall and the days-to-collect will fall,all other things equal.
D)fall and the days-to-collect will rise,all other things equal.

Question

Quizplus · Accepted Answer

If a company is shipping goods that have not been ordered in order to artificially inflate sales and net income, it is likely that these goods will not be paid for promptly. This will result in an increase in accounts receivable and a reduction in the receivables turnover ratio. Additionally, since these goods were not ordered, it is possible that customers may take longer to pay for them, resulting in an increase in the days-to-collect metric. Therefore, we would expect the receivables turnover ratio to fall and the days-to-collect to rise.

If a Company Attempts to Artificially Inflate Current Sales and Net