Many firms recognize revenus at the point of shipment. This provides an incentive to accelerate revenues by shipping goods at the end of the quarter. Consider two companies, one of which ships its product evenly throughout the quarter, and the second which ships all its products in the last two weeks of the quater. Each company's customers pay thirty days after receiving shipment. Using accounting ratios, how can you distinguish these companies?© BrainMass Inc. brainmass.com June 4, 2020, 2:33 am ad1c9bdddf
The actual income statements would appear no different when comparing the two companies. The company that pushes sales out during the last two weeks of the quarter will have a higher accounts receivable balance, and a brief analysis of the A/R account would show that there is a more even, stable A/R pattern for ...
The solution discusses how to determine a company's shipping methods based on their accounting ratios.