Apple, Inc., is best known for its Mac and iPod product lines. Three recent years produced a pattern of strong increases in sales revenue and net income. Cash flows from operations declined in the middle of the period, however. Contributing to that declining cash flow was the change in accounts receivable. The current and prior year balance sheets reported the following:

Required:
1. On the current year's cash flow statement (indirect method), how would the change in accounts receivable affect cash flow from operations? Explain why it would have this effect.
2. Explain how increasing sales revenue often leads to
(a) Increasing accounts receivable and thus
(b) Cash collections from customers being lower than salesrevenue.

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(dollars in thousands) Current Year Previous Year Accounts receivable, less allowances for doubtful accounts $707,000 $534,000