Credit policy

Please explain with formulas and examples.

$ in Millions	2017	2016	2015	2014
Income from operations	$140.0	$132.0	$127.5	$127.0
Net income	$38.5	$35.0	$34.5	$29.5
Cash flow from operations	$1.6	$19.0	$14.0	$15.5

The table above shows increasing profits of the company but an ominous trend in cash flow, which is consistently lower than net income. Additionally, the company noticed three events in the last two years that, unfortunately, seemed related:

1. A company loosened its credit terms and lengthened payment periods.
2. Accounts receivable balances increased dramatically.
3. Several of the companys compensation arrangements, including the controller and the company president, were based on reported net income.

Should the company be concerned about its financial position? What necessary actions should a company take to prevent potential issues?