Interpreting a cash flow statement Adelaide Airways Ltd and Perth Express Ltd are two companies, similar in size, in the commuter airline business. They fly passengers from Adelaide and Perth to smaller cities in their states.

ADELAIDE AIRWAYS LTD STATEMENT OF CASH FLOWS FOR THE YEARS ENDING 30 SEPTEMBER 2022 AND 2021 2022 2021

$ $

Cash flows from operating activities Receipts from customers 580 000 561 000 Payments to suppliers and employees (530 000) (430 000)

Net cash provided by operating activities 17 000 131 000 Cash flows from investing activities Purchase of equipment (120 000) (91 000)

Proceeds from sale of equipment 118 000 39 000 Proceeds from sale of investments 52 000 4 000 Net cash provided by (used in) investing activities 50 000 (48 000)

Cash flows from financing activities Proceeds from short-term loans 122 000 143 000 Repayment of short-term loans (179 000) (134 000)

Payment of dividends (45 000) (64 000)

Net cash used in financing activities (102 000) (55 000)

Net increase (decrease) in cash (35 000) 28 000 Cash balance at the beginning of the year 131 000 103 000 Cash balance at the end of the year 96 000 131 000 PERTH EXPRESS LTD STATEMENT OF CASH FLOWS FOR THE YEARS ENDING 30 SEPTEMBER 2022 AND 2021 2022 2021

$ $

Cash flows from operating activities Receipts from customers 776 000 632 000 Payments to suppliers and employees (528 000) (439 000)

Net cash provided by operating activities 248 000 193 000 Cash flows from investing activities Purchase of equipment (303 000) (453 000)
Proceeds from sale of equipment 46 000 39 000 Proceeds from sale of investments 0 33 000 Net cash used in investing activities (257 000) (381 000)
Cash flows from financing activities Proceeds from short-term loans 43 000 35 000 Proceeds from long-term loans 131 000 83 000 Repayment of short-term loans (66 000) (18 000)
Net cash provided by financing activities 108 000 100 000 Net increase (decrease) in cash 99 000 (88 000)
Cash balance at the beginning of the year 116 000 204 000 Cash balance at the end of the year 215 000 116 000 Required:
1 Why is the additional information contained in the statement of cash flows important when evaluating a company’s performance?
2 Based on an examination of their statements of cash flows, discuss the relative strengths and weaknesses of Adelaide Airways and Perth Express.