Problem:
Lee wants to know if he will have to keep putting cash into companies after he purchases them. Here are three companies Lee has identified as potential acquisitions along with the information from the most recent cash flow statements (see below table). All of these companies have a very small current cash balance. Which company is least likely to need additional cash inflows from Lee in order to continue to operate over the next several years? Explain briefly why (one or two sentences).
| Cash flow items: |
L-Co Inc. |
Z-Co Inc. |
W-Co Inc. |
| Payments to vendors |
$26,000 |
$89,000 |
$142,000 |
| Purchases of long-term assets |
$101,000 |
$34,000 |
$12,000 |
| Cash collections from customers |
$45,000 |
$82,000 |
$92,000 |
| Sale of long-term assets |
$2,000 |
None |
None |
| Loan obtained during period |
$10,000 |
None |
$19,000 |
| Dividends paid |
$10,000 |
$10,000 |
None |
| Contributions from owners |
$56,000 |
$61,000 |
$42,000 |