According to the Text,why Is the Accounts Receivable Turnover Ratio

question 31

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 to 1, any deviation from this number is easy to detect.

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Definitions:

Economic Losses

Financial losses incurred due to unfavorable business conditions, natural disasters, or other unexpected events that negatively impact the economy.

Implicit Cost

The opportunity cost equal to what a firm must give up in order to use resources it owns, without paying rent or borrowing costs.

Free Entry

A market condition where new participants can enter the industry freely without facing prohibitive barriers to entry.

Zero Profits

A situation in which a company's revenues exactly equal its expenses, resulting in no net income or loss.