Interpreting the statement of cash flows. Exhibit 4.40 presents a statement of cash flows for Nike, Inc., maker of athletic shoes, for three recent years.

a. Why did Nike experience increasing net income but decreasing cash flow from operations during this three-year period?

b. What is the likely explanation for the changes in Nike's cash flow from investing during the three-year period?

c. How did Nike finance its investing activities during the three-year period?

d. Evaluate the appropriateness of Nike's use of short-term borrowing during Year 9.

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EXHIBIT 4.39 DIGIT RETAIL ENTERPRISES, INC. Income Statement For Year 5 (Problem 35) Sales Revenue Gain on Sale of Property, Plant, and Equipment Interest Revenue Total Revenues Less Expenses: Cost of Goods Sold Salaries Expense Rent Expense Insurance Expense Depreciation Expense. Other Expenses Total Expenses Net Income $270,000 3,200 200 $273,400 $145,000 68,000 12,000 5,000 20,000 13,800 $263,800 $ 9,600