An increase in the effort put into collection of accounts receivable will result in ________ in the investment in accounts receivable, ________ in bad debts expense, and ________ in collections expenditure.

Question

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An increase in the effort put into the collection of accounts receivable typically results in a decrease in the investment in accounts receivable because more efficient collection processes reduce the amount of outstanding receivables. It also leads to a decrease in bad debts expense because more effective collection efforts reduce the likelihood of accounts becoming uncollectible. However, these efforts usually come at a cost, leading to an increase in collections expenditure.

An Increase in the Effort Put into Collection of Accounts