Question

Earthlink, Inc., is a nationwide Internet Service Provider (ISP). Earthlink provides a variety of services to its customers, including narrowband access, broadband or high-speed access, and Web hosting services. For the years ending December 31, 2004 and 2003, Earthlink reported the following (in thousands):


Assume that the accounts receivable (in thousands) were $53,496 at January 1, 2003.
1. Compute the accounts receivable turnover for 2004 and 2003. Round to one decimal place.
2. Compute the days’ sales in receivables at the end of 2004 and 2003.
3. What conclusions can be drawn from (1) and (2) regarding Earthlink’s efficiency in collecting receivables?
4. Given the nature of Earthlink’s operations, do you believe Earthlink’s accounts receivable turnover ratio would be higher or lower than a typical manufacturing company, such as Boeing or Kellogg’s?Explain.


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  • CreatedMay 29, 2012
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