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.

Question

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.

Quizplus · Accepted Answer

The Answer of 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.

The Quarterly Cash Flows from Operations for Two Technology Companies