Case 2. (Learning Objectives 1, 2: Using cash-flow data to evaluate an investment)

Applied Technology, Inc., and Four-Star Catering are asking you to recommend their shares to your clients. Because Applied and Four-Star earn about the same net income and have similar financial positions, your decision depends on their statements of cash flows, summarized as follows:

Based on their cash flows, which company looks better? Give your reasons. (Challenge)

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Net cash provided by operating activities: Applied $ 30,000 Four-Star $ 70,000 Cash provided by (used for) investing activities: Purchase of PPE......... $(20,000) $(100,000) Sale of PPE 40,000 20,000 Cash provided by (used for) financing activities: Issuance of shares. Paying off long-term debt. Net increase in cash.... (40,000) $ 10,000 10,000 (90,000) 30,000 $10,000