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Improving Cash Flow through Receivable Management Star Communications designs, manufactures, and sells telecommunication equipment, and provides services associated with their installation, operation, and maintenance in China, India, Korea, and Vietnam. During 2005, the company's share price traded as high as $23 per share. But, in January, 2005, the company disclosed that it would file its Form 10-K with the U.S. Securities and Exchange Commission late due to material internal control problems identified by its independent auditor, PricewaterhouseCoopers. One of the identified concerns related to the company's recording of revenue and the related accounts receivable. In response, the company's share price sank to $6 per share. Following are selected financial data from Star Communications' 2004 annual report: (billions) 2004 2003 Net sales $2.79 $1.96 Accounts receivable (net) 0.81 0.37 1. (a) Calculate Star Communications' receivable collection period for 2003 and 2004. Round to two decimal places. 2004 2003 Receivable collection period 0 days o days (b) Is the company's receivable management decreasing in quality, improving, or about the same? 2. If the company could improve its receivable collection period to the industry average of 60 days, how much additional cash flow from accounts receivable would have been generated in 2003 and 2004? In billions, rounded to three decimal places 2004 2003 Revised receivable balance $ Increase in cash flow from receivables $ 0 billion $ 0 billion $ 0 billion 0 billion

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