If a firm's sales and those of its customers are closely correlated with economic conditions,it is possible for a firm's total investment in accounts receivable to decrease while its days sales outstanding increases.

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If economic conditions worsen, customers may have difficulty paying their bills on time, resulting in an increase in days sales outstanding. However, if the firm becomes more selective in extending credit to customers or tightens its credit policies, its total investment in accounts receivable may decrease. Therefore, it is possible for the firm's total investment in accounts receivable to decrease while its days sales outstanding increases, especially during an economic downturn.

If a Firm's Sales and Those of Its Customers Are