Final answer:
When the % increase in sales is less than the % increase in receivables, it indicates that the company's revenue is decreasing. This can be explained using the concept of elasticity. If the demand for a product is inelastic, a rise in price will result in a proportionally smaller decrease in quantity demanded.
Step-by-step explanation:
When the % increase in sales is less than the % increase in receivables, it indicates that the company's revenue is decreasing. This can be explained using the concept of elasticity. If the demand for a product is inelastic, a rise in price will result in a proportionally smaller decrease in quantity demanded.
For example, let's say a company increases the price of a certain product by 10%. However, as a result of this price increase, the quantity demanded decreases only by 5%. In this case, the % increase in price is larger than the % decrease in quantity demanded, indicating inelastic demand.
In the context of the question, if sales increase by a certain percentage, but receivables increase by a larger percentage, it suggests that the company is experiencing a decrease in revenue.