According to the Text, Why Is the Accounts Receivable Turnover

question 8

Multiple Choice

According to the text, why is the accounts receivable turnover ratio widely used in analyzing revenue-related fraud?

• A) Significant amounts of fictitious revenues and receivables will almost always affect this ratio except in rare cases.
• B) Adding fictitious receivables will generally decrease the number of days it takes to collect receivables.
• C) If the ratio generally exceeds 1, recording fictitious sales will significantly increase the ratio, making it easy to spot fraud.
• D) Since the ratio should ideally equal 1, any deviation from this number is easy to detect.

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Definitions:

Investment

The allocation of resources, usually money, in order to generate income or profit.

Financial Markets

Marketplaces where buyers and sellers engage in trading of financial assets such as stocks, bonds, derivatives, and currencies.

Daily Fluctuation

This describes the variations in the price of a financial instrument, such as stocks or commodities, within a single trading day.

Mispriced Securities

Refers to stocks or bonds that are sold for a price which does not accurately reflect their intrinsic value.