• What drove the increase in Jones's accounts receivable and inventory balances in 2005 and 2006? please help answer this quesrion

Exhibit 1 Operating Statements for Years Ending December 31, 2004-2006, Exhibit 2 Balance Sheet as of December 31, 20042006 and for the first quarter 2007 (thousands of dollars) and March 31, 2007 (thousands of dollars) Eutikite: Evkihit? 2007 Projected Income Statement - (10 pts) What drove the increase in Jones's accounts receivable and inventory balances in 2005 and 2006? - A firm's Accounts Receivable = A/R Days * Net Sales /365 - A firm's Inventory = Inventory Days * COGS/365 - As a firm's accounts receivable balance can be decomposed into two driving forces: (1) Net Sales and (2) A/R Days, which capture the average number of days for a firm to collect its accounts receivables. To answer the question, think along the following line: Is the higher accounts receivable balance due to an increase in net sales (growth) or due to a longer period in collecting its accounts receivables (lower efficiency). The same thought process applies to the inventory balance. (10 pts) What drove the increase in Jones's accounts receivable and inventory balances in 2005 and 2006