Virginia Tech Develop Skills for Analyzing Financial Statements Questions Response

Requirements

Based on the financial informa

tion provided on the next page,

what is Leggett & Platt,

Inc.’s gross amount of receivabl

es at the end of 2016 and 2015?

Compute the common-size amount for gross

accounts receivable, for both years (to

common-size a balance sheet it

em, it is expressed as a pe

rcentage of total assets).

Interpret the year-over-year change in this ratio.

Compute the allowance for doubtful account

s to gross accounts receivable, for both

years. Interpret the year-over-year change in this ratio.

Based on the ratios you calculated, form an

opinion about the quality of the company’s

accounts receivable.

How can companies use accounts receivables

to shift income between financial

accounting periods? Explain why managers engage

in this sort of activity. Discuss how

companies would justify such income shif

ting choices to the external auditor.