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An accounts receivable analysis is used to measure a firm's solvency. The size and composition of accounts receivable is under continuous change, and therefore must be watched closely. Since funds tied up in accounts receivable yield no benefits or interest, it is best to keep this balance to a minimum. The quicker a firm is able to turn-over its accounts receivable, the lesser the risk of loss from uncollectible accounts. In addition, the firm has the option to put these funds into more productive uses.
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