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Two companies (Company A and Company B) approached you for a loan. Both companies are similar in most aspects except for the composition of cash
Two companies (Company A and Company B) approached you for a loan.
Both companies are similar in most aspects except for the composition of cash flows (see below).
| Company A |
| Company B |
Net cash flows from: | 2019 ($) 2018 ($) |
| 2019 ($) 2018 ($) |
Operating activities | 150,000 70,000 |
| (50,000) 30,000 |
Investing activities | (80,000) (40,000) |
| 120,000 - |
Financing activities | 30,000 10,000 |
| 30,000 10,000 |
Net cash flows | 100,000 40,000 |
| 100,000 40,000 |
Examine the above information to explain whether you should lend to Company A or Company B.
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