Assume you are working for BB&T based in Morgantown, WV. You are comparing two agribusinesses that...

  

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Assume you are working for BB&T based in Morgantown, WV. You are comparing two agribusinesses that have applied for loans. The summary Cash Flow Statement for the last 3-years for the two companies - Spring Valley Farms, and Family Roots Farm are below. The Net Cash Flows for all 3-years are the same. Answer the following questions about these two businesses. Summary Cash Flow information for the last 3-years from Spring Valley Farms, and Family Roots Farms are as follows. Cash flows from: Operating activities Investing activities Financing activities Net from all activities Spring Valley Farms Yr. 2 Yr.1 Yr. 3 Family Roots Farms Yr. 1 Yr. 2 $10.000 (40,000) -0- Yr. 3 ($100,000) ($80,000) $100,000 $120,000 $ 210,000 60,000 80,000 (50,000) (50,000) (40,000) 10,000 30,000 80,000 (40,000) (40,000) ($ 30,000) $30,000 $130,000 ($ 30,000) $30,000 $130,000 Instructions a. The Net Cash Flows for all 3-years for these two businesses are identical. Based on this information, do you think the two companies are approximately equal in terms of their strength as loan candidates? Why or why not explain fully (use the numbers to explain remember numbers in parentheses indicates negative numbers or cash your answer - outflows). b. What might account for the fact that Family Roots Farms' cash flow from financing activities is zero in Year 1 and negative in the next two years? c. Which business do you think makes the better loan candidate? Give reasons for your d. answer. Generally, what would you advise would you give to others with regard to using statements of cash flows in evaluating loan candidates? Assume you are working for BB&T based in Morgantown, WV. You are comparing two agribusinesses that have applied for loans. The summary Cash Flow Statement for the last 3-years for the two companies - Spring Valley Farms, and Family Roots Farm are below. The Net Cash Flows for all 3-years are the same. Answer the following questions about these two businesses. Summary Cash Flow information for the last 3-years from Spring Valley Farms, and Family Roots Farms are as follows. Cash flows from: Operating activities Investing activities Financing activities Net from all activities Spring Valley Farms Yr. 2 Yr.1 Yr. 3 Family Roots Farms Yr. 1 Yr. 2 $10.000 (40,000) -0- Yr. 3 ($100,000) ($80,000) $100,000 $120,000 $ 210,000 60,000 80,000 (50,000) (50,000) (40,000) 10,000 30,000 80,000 (40,000) (40,000) ($ 30,000) $30,000 $130,000 ($ 30,000) $30,000 $130,000 Instructions a. The Net Cash Flows for all 3-years for these two businesses are identical. Based on this information, do you think the two companies are approximately equal in terms of their strength as loan candidates? Why or why not explain fully (use the numbers to explain remember numbers in parentheses indicates negative numbers or cash your answer - outflows). b. What might account for the fact that Family Roots Farms' cash flow from financing activities is zero in Year 1 and negative in the next two years? c. Which business do you think makes the better loan candidate? Give reasons for your d. answer. Generally, what would you advise would you give to others with regard to using statements of cash flows in evaluating loan candidates?

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