You are evaluating two companies as possible investments. The two companies, similar in size, are commuter airlines that fly passengers across the United States of America. All other available information has been analyzed and your investment decision depends on the statements of cash flows.

Requirement
1. Discuss the relative strengths and weaknesses of Zoom and Skyview. Conclude your discussion by recommending one of the companies stocks as aninvestment.

Transcribed Image Text:

Zoom Airlines Statements of Cash Flows Years Ended May 31, 2011 and 2010 2011 2010 Operating activities: 5(78,000) Net income (net loss Adjustments for noncash items: Total Net cash provided by operating activities..... $160,000 88,000 10,000 33,000) 127,000 Investing activities: Purchase of property, plant, and $ (70,000) S(110,000) Sale of long-term investments73,000 Net cash provided by (used for) 3,000 (88,000) Financing activities: Payment of short-term notes payabl...(191,000) Payment of cash dividends.50,000) Net cash used for financing activities $ 138,000 (100,000) (79,000 Increase (decrease) in cash Cash balance at beginning of Cash balance at end of 130.000 S(117,000) 125,000 $ 8,000 (41,000) S (2,000) 127,000 $125,000 Skyview, Indc. Statements of Cash Flows Years Ended May 31, 2011 and 2010 2011 2010 Net income S 150,000 $ 110,000 Adjustmenrs for noncash items: Total 69,000 219,000 49,000 159,000 Net cash provided by operating activities. Investing activities: Purchase of property, plant, and equipment. $(334,000) Sales of property, plant, and equipment65.000 Net cash used for investing activitics (470,000) 84.000 (269,000) (386,000) Financing activities: Issuance of long-term notes payablc 182,000 Payment of short-term notes payable.(80.000) Net cash provided by financing acávities... S 125,000 Increase (decrease) in Cash balance at beginning of year Cash balance at end of yea. 102,000 S 52,000 101,000 S 153,000 113,000 S(114,000) 215,000 S 101,000