Nike, Inc., is the best known sports apparel and equipment company in the world. Three recent years produced a combination of dramatic increases in sales revenue and net income. Cash flows from operations declined during the period, however. Contributing to that declining cash flow was the change in accounts receivable. The current and prior year balance sheets reported the following:

Required: 1. On the current year's cash flow statement (indirect method), how would the change in accounts receivable affect cash flow from operations? Explain why it would have this effect. 2. Explain how increasing sales revenue often leads to

(a) increasing accounts receivable and thus

(b) cash collections from customers being lower than sales revenue.

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Accounts receivable, less allowance for doubtful accounts (IN THOUSANDS) Current Previous Year Year $1,346,125 $1,053,237