Response to the following questions:
1. Would a company that uses a natural business year tend to overstate or understate the liquidity of its receivables? Explain.
2. T. Melcher Company uses the calendar year. Sales are at a peak during the holiday season, and T. Melcher Company extends 30-day credit terms to customers. Comment on the expected liquidity of its receivables, based on the days' sales in receivables and the accounts receivable turnover.