Assume that a company normally gives credit to customers, and has substantial accounts receivable. You notice that in the latest year the accounts receivable turnover ratio has gone down. Even though sales have increased by 10%, receivables have grown proportionally faster.

A. What might be valid business reasons that would cause a company to allow its accounts receivable to increase faster than sales?

B. What might be business problems that are indicated by a decrease in the accounts receivable turnover?

C. Auditors worry that increases in accounts receivable could be a sign of fraudulent financial reporting. Why might a company committing fraud overstate its accounts receivable?