The company with the natural business year tends to overstate its accounts receivable turnover,thus overstating its liquidity.

Question

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When a company has a natural business year, it means that its accounting period ends at a time that coincides with the end of a business cycle, such as the end of a season. This can lead to fluctuations in its accounts receivable turnover, making it easier for the company to manipulate or overstate this metric. Overstating accounts receivable turnover can give the impression that the company is more liquid than it actually is, which can be misleading to investors and creditors.

The Company with the Natural Business Year Tends to Overstate