Theater by Design and Showcase Cinemas are asking you to recommend their stock to your clients. Because Theater by Design and Showcase earn about the same net income and have similar financial positions, your decision depends on their cash flow statements, summarized as follows:
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Theater by Design
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Showcase Cinemas
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Net cash provided by operating activities
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$ 30,000
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$ 70,000
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Cash provided by (used for) investing activities:
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Purchase of plant assets
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Sale of plant assets
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$(20,000)
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$(100,000)
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Cash provided by (used for) financing activities:
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40,000
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20,000
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10,000
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(90,000)
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Issuance of common stock
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-
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30,000
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Paying off long-term debt
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(40,000)
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-
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Net increase in cash
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$ 10,000
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$ 10,000
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Requirement
1. Based on their cash flows, which company looks better? Give your reasons.