A lower than usual allowance for uncollectible accounts may indicate a company is manipulating earnings using big bath charges.

Question

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A lower than usual allowance for uncollectible accounts may indicate a company is being overly optimistic about its ability to collect receivables, not necessarily manipulating earnings through big bath charges, which typically involve taking all possible write-offs in one period to make future periods look better.

A Lower Than Usual Allowance for Uncollectible Accounts May Indicate