The receivables is the problem here
Generally Agro Chem are sold through distributors. The Co pushes the distributors to buy and stock their product. What ever quantity supplied to the distributors is shown as sales and they show profit on it.
To increase the sales, the co sells the product without cash upfront. The distributor repays the amount later (this is shown as receivables in balance sheet).
The distributor will return the product he’s not able to sell. So, the Co needs to reverse the sales that means whatever sales they’ve shown earlier are reduced now.
This exactly is the problem here. As long as the co doesn’t get back the receivables, there is a chance of reversal of sales and profit.
So, we can’t judge the sales shown in p&l statement as true sales and same for the profit
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