In Chapter 4, various ratios and other tools for analyzing financial statements were introduced. For each of the following examples, indicate if an unusual ratio might indicate the company misstating some asset or liability. Explain your answers.

A. Inventory turnover is much lower than normal.

B. Accounts receivable turnover is lower than normal.

C. The company seems to be paying its average accounts payable faster than normal, based on the reported amount of accounts payable at the end of the year.

D. The company’s estimate of the amount of accounts receivable that it will not collect is much smaller this year than in prior years. (This means it is now expecting to collect a higher percentage of accounts receivable than normal.)