The partner at AJM firm wants to test newly promoted managers' knowledge of analyzing ratios, since this a task often assigned to managers at AJM.

Each explanation should be considered independently of other explanations. Selections may only be used once.

1) Fictitious credit sales have been recorded during the current year.

2) The company factored, without recourse, 75% of their receivables to the bank in the current year.

3) A cash register clerk did not record sales related to customers who paid cash for various inventory items in the current year

4) The client recently tightened its credit-granting policies in the current year.

5) The client recently tightened its credit-granting policies in the current year.

6) The accounts receivable aging has deteriorated in the current year.

7) An employee stole inventory just before the year-end under audit.

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For each explanation, determine whether it might explain:

1) Explanations for a lower accounts receivable turnover ratio in the current year than the prior year.

2) Explanations for a higher accounts receivable turnover ratio in the current year than the prior year:

3) Explanations that would not affect the accounts receivable ratio: