Question

Reading and Interpreting 5-1 a-f, g1 Exhibits 5.19A and 5.19B contain the consolidated statements of cash flows and related note disclosure for The Second Cup Ltd. EXHIBIT 5.19A The Second Cup Ltd.'s 2016 Statements of Cash Flows STATEMENTS OF CASH FLOWS For the periods ended December 31, 2016 and December 26, 2015 (Expressed in thousands of Canadian dollars) 2016 2015 CASH PROVIDED BY (USED IN) Operating activities $ (975) (1,153) Net loss for the period Items not involving cash Depreciation of property and equipment 1,168 1,091 Amortization of intangible assets 403 374 Share-based compensation expense 53 86 Deferred income taxes (note 19) 238 211 Loss (gain) on disposal of capital related items (21) 225 Change in fair value of interest rate swap (note 5) (77) 4 (1,177 Changes in non-cash working capital & other (note 21) (2,288) Cash used in (provided by) operating activities (1,253) (585) Investing activities Proceeds from disposal of capital related items 334 497 Cash payments for capital expenditures (note 21) (382) (1,942) Cash payments for intangible assets (note 21) (733) (393) Notes receivable repayment (issuance) (5) 76 Cash used in investing activities (365) (2,183) continued 2016 2015 Financing activities (6,000) (5,000) Repayment of term loan (note 14) Repayment of swap (note 5) (70) Proceeds from new term loan 8,000 (458) Transaction costs Cash provided by (used in) financing activities (5,070) 1,542 Increase (decrease) in cash and cash equivalents during the period (76) (7,838)

Answer 1

Cash and cash equivalent declined by $76 and amounted to $3,004 in 2016. The ending cash and cash equivalent amounted to $3080 in 2015.

For 2016, net loss of $975 was reported and the company had cash flow from operating activities $1,253.

The difference between these two figures was $ 1,111 due to changes in working capital which was $2,288 in 2016 compared with $1,177 in 2015.

In 2016, accounts payable and accrued liabilities increased by $1,007. This increase helped cash from operating activities to increase. It also indicates, that the company has not yet to paid to its creditors, its also a kind of source of funding and cash inflow.

Gift card liability declined to $70 in 2016 from $172 in 2015 indicating out flow of cash.

The company did purchase property, plant and equipment and amounted to $382 in 2016. It has also purchased intangibles amounting to $393 in 2016. Also, it received some cash from sale of certain capital related assets.

Free cash flow is the cash left over after a company has paid its operating expenses and capital expenditures (including intangibles).

For 2016, cash flow from operating activities $1,253 less capital expenditure $775 = $1,253 - $775 = $478

For 2015, cash flow from operating activities $585 less capital expenditure $2,675 = $585 - $2,675 = ($2,090)

The trend is positive, as it has increased to $478 in 2016 from ($2,090) in 2015.

Cash flows to total liabilities = cash flow from operations / total liabilities

	2016	2015
Cash flow from operations	1,253	585
Total liabilities	22,038	22,558
Ratio	5.7%	2.6%