Question: The quarterly cash flows from operations for two software companies are Required: 1. Explain why Firm B has more credit risk than Firm A. 2.

The quarterly cash flows from operations for two software companies are

Required:
1. Explain why Firm B has more credit risk than Firm A.
2. Suppose that Firm B€™s cash flow was $200 higher each quarter (e.g., $336.7 in Q1 of 2013). Explain why Firm B might still be judged to have higher credit risk than FirmA.

2014 QI S587.8 (161.4) 2013 Qi Q2 Q3 $729.1 708.2 Q4 Firm A Firm B $406.1 136.7 $204.2 243.1 $440.2 (87.9)

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