The Quarterly Cash Flows from Operations for Two Technology Companies

question 36

Essay

The quarterly cash flows from operations for two technology companies are as follows:
$$\begin{array} { c c c c c c } & { 2013 } &&&& 2014 \\& \mathrm { Q } 1 & \mathrm { Q } 2 & \mathrm { Q } 3 & \mathrm { Q } 4 & \mathrm { Q } 1 \\\text { Firm 1 } & \$ 451.2 & \$ 220.8 & \$ 703.5 & \$ 475.5 & \$ 601.2 \\\text { Firm 2 } & \$ 165.9 & \$ 240.7 & \$ 698.8 & ( \$ 91.8 ) & ( \$ 173.3 )\end{array}$$
Required:
Explain why Firm 2 has more credit risk than Firm 1.

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Definitions:

Leukemia

A type of cancer that affects the blood and bone marrow, characterized by an overproduction of abnormal white blood cells.

Enlarged Liver

An increase in size of the liver beyond its normal dimensions, which may indicate a variety of health conditions.

Congestive Heart Failure

A condition where the heart's function as a pump is inadequate to meet the body's needs, leading to symptoms such as shortness of breath.

Leukemia

A type of cancer of the body's blood-forming tissues, including the bone marrow and the lymphatic system, leading to an increase in white blood cells that can impair the body's ability to fight infection.