Refer to the information about Galahad provided in Problem P12-14. You are an investment analyst for Qualicum Investment Group, Inc. (Qualicum). Qualicum raises capital from individual investors and invests in promising small businesses, with the expectation that the businesses will grow and that it will ultimately be able to sell the investments at a profit. The president of Galahad has approached your organization to make a significant equity investment in the company.

Required:

Prepare a report to Qualicum’s executive board analyzing Galahad’s performance over the last few years and assessing its attractiveness as an investment. What additional information would you want before reaching a final decision on whether to invest? In your analysis consider Galahad’s cash flow.