Factors Affecting the Valuation of Receivables

D

The most important factor that will affect the valuation of receivables, of the choices given, is the allowance for uncollectible accounts. This is so, because receivables are reported on the balance sheet as "net realizable value;" i.e., total amount of receivables, less an allowance for uncollectible accounts. If management understates this allowance, the realizable value of accounts receivable will be overstated and the firm's liquidity position will not be as strong as it would appear.