If you know finance or accounting, please answer this?

Question

If the sales have increase but the receivables and inventories have decrease, is this good or bad for the company? and why?

Answer 1

Sales increase is good as long as your company can maintain quality. It grows the company.

Receivables decrease at the same time means that your customers are paying you more quickly. Good.

Inventories decrease may be good or bad. It's good if you have enough to cover orders or your production can cover orders. It's bad if you cannot cover existing orders and cannot produce enough to do so in a timely manner.

Answer 2

there is no pat answer - but it would make sense - if ordering levels are flat and sales increase, then there is less inventory - A/R decrease doesn't make sense unless you have more cash customers and less credit customers.

It can be good and a sign of expansion (meaning, order more inventory), or it can be bad because if you're going out of business and having a fire sale, the same phenomenon will occur.

Answer 3

It's bad because the net profit is less. You can right off the inventories and the receivables.