XYZ Co.'s 2015 ratio of allowance for uncollectibles to gross receivables has declined from the ratio at the end of 2014.To evaluate whether the reduction in XYZ's ratio is reasonable,an analyst should
A)compare the ratio to other firms in XYZ's industry.
B)look for additional discussion in XYZ's annual report.
C)listen to the analyst earnings briefing.
D)do all of these.

Question

Quizplus · Accepted Answer

To evaluate the reasonableness of the reduction in XYZ Co.'s allowance for uncollectibles to gross receivables ratio, an analyst should take a comprehensive approach. This includes comparing the ratio to other firms in the same industry to understand industry standards and trends, looking for additional discussion in XYZ's annual report for management's explanation or any disclosed changes in accounting policies, and listening to the analyst earnings briefing for any further insights or explanations provided by the company's management.

XYZ Co'S 2015 Ratio of Allowance for Uncollectibles to Gross Receivables