If a firm's average accounts receivable balance increases, this could be because the company improved what customers it extended credit to.

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If a firm's average accounts receivable balance increases, it means that the company is extending more credit to its customers, either by selling more on credit or by increasing the duration of credit terms. It does not necessarily indicate that the company has improved the quality of customers it extends credit to.

If a Firm's Average Accounts Receivable Balance Increases, This Could