When business buys raw materials for manufacturing / ready goods for trading, it pays the supplier cash - Cash Outflow. The raw material is converted into finished goods. At this point, there is an increase in stock (finished goods). Hence, increase in stock is assumed to be cash reduction in cash flow statement. On the other hand, if a good is sold, and there is immediate receipt of cash, then there is cash inflow and it negates the cash outflow that happened initially. If goods are sold on credit, there is no immediate cash inflow. In other words, the cash that was used to buy the goods initially has not returned to the business. Hence, increase in accounts receivables is cash reduction in cash flow statement.

This is another brainteaser question, where one needs to stop and think about the relationship between accounts receivable and net income (increasing AR) , and the receiving of the actual cash which impacts the cash flow statement (increases the CFS when cash is received, but decreases the CFS when AR is increased on the income statement).