WorldBiz operates divisions around the world. Its European division and Euro Biz (EB) and has recently reported the following information to you at World Biz's head office. You are trying to decide whether to direct your internal audit staff to investigate more closely.
Required:
1. For each of the years, calculate the proportion of gross accounts receivable estimated to be uncollectible as allowed for in the Allowance for Doubtful Accounts. Round to one decimal place. Which year does not align with the other two?
2. For each of the years, calculate the proportion of Net Sales Revenue that Bad Debt Expense represents. Round to one decimal place. Which year does not align with the other two?
3. Did customers take greater (or lesser) advantage of sales discounts in 2015 than in 2014 and 2013? Does this indicate customers were more (or less) likely to promptly pay their balances in 2015 as compared to prior years?
4. Calculate the average days to collect in 2015 and 2014. Does this measure indicate customers paid their balances faster (or slower) in 2015 as compared to 2014?
5. Given your answers to requirements 1 through 4, indicate (yes or no) whether you should direct your internal audit staff to investigate EB's receivables management practices more closely.