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Cash flow and cash balance for three companies

Below are summary cash flow statements for three roughly equal-size companies.

($ millions)
Net cash flows from operations $ (300) (300) $300
Net cash used in investing activities (900) (30) (90)
Net cash from financing activities 1,200 210 (240)
Cash balance at beginning of year 150 150 150

a. Calculate each company's cash balance at the end of the year.
b. Explain what might cause company C's net cash from financing activities to be negative.
c. Looking at companies A and B, which company would you prefer to own? Why?
d. Is company C's cash flow statement cause for any concern on the part of C's management or shareholders? Why or why not?

Solution Preview

a) Company A = 150-300-900+1200=150 million
Company B = 150-300-30+210=30 million
Company C = 150+300-90-240=120 million

b) The company must have paid some debts. The amount of debt raised is less than the amount of debts ...

Solution Summary

The solution calculates and compares the cash balances for three different companies.