Accounting Ratios

Accounts Receivable >90%ile

In our accounting risk assessment, we penalise any company which reports receivables to sales in the highest decile relative to its global industry peer group. Aggressive revenue recognition often translates into unusually large receivables and is at the core of many past accounting frauds. For example, around 50% of confirmed frauds in our research library between 2014 and 2020 had unusually large receivables in the top decile relative to peers. As such, we believe that companies with unusually large receivables embody a high level of accounting risk and should be penalised.

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