Federal Express provides door-to-door delivery service of small packages and docu¬ ments throughout the United States. Its December 31, 1994, statement of cash flows included the following: Years ended May 31 (In thousands) 1994 1993 1 992 Operating Activities Net income (loss) $ 204,370 $ 53,866 $(113,782) Adjustments to reconcile income (loss) to net cash provided by operating activities: Depreciation and amortization 599,357 579,896 577,157 Provision for uncollectible accounts 45,763 33,552 31,670 Provision (credit) for deferred income taxes and other 3,810 19,910 (75,219) (Gain) loss from disposals of property and equipment (11,897) (5,648) 1,810 Cumulative effect of accounting change — 55,943 — Changes in assets and liabilities, net of effects from purchases and dispositions of businesses: (Increase) in receivables (173,902) (41,535) (727) (Increase) decrease in other current assets (7,826) (5,813) 61,749 Increase in accounts payable, accrued expenses and other liabilities 110,508 13,651 33,620 Other, net (2,905) 21,259 4,543 Net cash provided by operating activities $ 767,278 $725,081 $ 520,821 REQUIRED:

a. Depreciation and amortization are added to net income in the computation of net cash pro¬ vided by operating activities. Does this mean that depreciation and amortization are sources of cash? Explain.

b. What method does Federal Express use to account for uncollectible accounts? Explain why a provision for uncollectible accounts is added to net income in the computation of net cash provided by operating activities.

c. What can one infer about how Federal Express is managing its current assets and liabili¬ ties from the operating section of the statement of cash flows?