Presented below are cash flow data for the Miller Corporation. During this period of time, the manufacturer and retailer of athletic shoes and sportswear experienced a 1200 percent growth in net income. (in thousands) Cash flow from operations Net income Depreciation Noncash compensation to employees Increase in accounts receivable Increase in inventories Increase in prepayments Increase in accounts payable The Miller Corporation Statement of Cash Flow For Year Ended 12/31 Increase (Decrease) in other current liabilities Cash flow from operations Cash flow from investing Sale of marketable securities Acquisition of property, plant & equipment Acquisition of other noncurrent assets Cash flow from investing Cash flow from financing Increase (Decrease) in short-term borrowing Issue of common stock Cash flow from financing Change in cash Year 1 $ 4,371 133 (12,410) (1,990) (599) 1,656 (537) (9,376) 5,661 (874) (241) 4,546 4,566 4,566 $(264) Year 2 $22,030 446 (34,378) (50,743) (2,432) 7,197 11,193 (44,687) (2,546) (406) (2,952) Year 3 $55,059 1,199 558 (51,223) (72,960) (8,624) 17,871 10,587 (47,533) (6,168) (246) (6,414) 50,104 (19,830) 495 69,925 50,599 50,095 $960 $ (3,852) REQUIRED: a) Explain why the cash flow from operations is negative. b) How did the company finance its operations during the three-year period? Explain the logic of this strategy. Depreciation expense as a percent of net income is only two to three percent during this period. What might explain this?

Presented below are cash flow data for the Miller Corporation. During this period of time, the manufacturer and retailer of athletic shoes and sportswear experienced a 1200 percent growth in net income. REOUIRED: a) Explain why the cash flow from operations is negative. b) How did the company finance its operations during the three-year period? Explain the logic of this strategy. c) Depreciation expense as a percent of net income is only two to three percent during this period. What might explain this