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 2016, the company’s share price traded as high as \($23\) per share; but, in January, 2016, 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. 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 2015 annual report:

Required
1. Calculate UTStarcom’s receivable collection period for 2014 and 2015. 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 2014 and 2015?

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Net sales. Accounts receivable (net).. 2015 $2.56 billion 0.81 billion 2014 $1.78 billion 0.37 billion