Writing in Corporate Cashflow, Howard Schillit described how the market value of  Comptronix fell from $238 million to $67 million in a few hours when it was revealed that management had "cooked the books." Comptronix provided contract manufacturing services to makers of electronic equipment. Its 1991 financial results looked strong.
However the relationship between sales and accounts receivable sent signals to knowledgeable analysts.

1. Discuss the relationship that you would expect between sales and accounts receivable in a normal situation.
2. What unethical actions might cause sales to grow so much faster than accounts receivable? What unethical actions might cause the opposite, that is, for accounts receivable to grow faster than sales?
3. What is the most likely type of "cooking the books" that occurred at Comptronix?

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1991 Sales Accounts receivable Accounts receivable turnover 1990 $70.2 million 12.0 million Change +45% + 5% $102.0 million 12.6 mill ion 8.1 5.9