Topps Co., Inc., produces sports cards. During two quarters in the same year, Topps’ accounts receivable increased by more than 50%, while sales declined.

Such a trend might indicate that Topps is experiencing difficulty collecting from its customers.

Topps asserts,however,that receivables have increased because of a change in its shipping schedule.It has begun to ship 50% of its cards in the final few weeks of a quarter.Thus, many of its accounts receivable are outstanding at quarter’s end, and at the same time, are not yet past due.

Required

a. How might Firm X’s managers react to these data?

b. What recommendations would you make to Firm X?