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Chapter 12. Analysis Tool #9: Detecting ... > Accounts Receivables & Inventories

Accounts Receivables & Inventories

Analyzing accounts receivable and inventory levels is arguably the most widely used method for spotting red flags.

Accounts Receivables

Unlike when they sell to us, a company doesn't usually require payment in advance when it sells to another firm. Instead, it bills the customer and specifies a payment due date. Accounts receivables are the monies owed by customers for goods already shipped and billed. Normally, you'd expect the receivables total to more or less track sales. That is, if sales double, receivables should double also.


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