Big Rock Brewery Inc. is a regional producer of craft beers and cider. The company€™s products are sold in nine provinces and territories in Canada. Exhibits 10-17A to C contain extracts from Big Rock€™s 2013 annual report.

Required:
a. Calculate the ratios that the management of Big Rock Brewery have indicated they monitor in relation to their management of capital.
b. Write a short report commenting on the results of the ratio calculations in part €œa.€

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BIG ROCK BREWERY INC.'S 2013 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION EKHIBIT 10-17A BIG ROCK BREWERY INC Consolidated Statements of Financial Position In thousands of Canadian dollars) December 30, 2013 December 30, 2012 ASSETS Non-current assets Property, plant and equipment (Note 11) Intangible assets (Note 12) $ 35,142 108 35,250 $35,277 128 35,405 Current Inventories (Note 13) Accounts receivable (Notes 14 and 22) Prepaid expenses and other (Note 15) Cash 2,983 1,353 754 2,317 7407 42,657 3,892 2,358 364 4,281 10,895 46,300 Total assets LIABILITIES AND SHAREHOLDERS' EQUITY EQUITY Shareholders' capital (Note 16) Contributed surplus (Notes 16 and 17) Accumulated deficit $100,109 892 (71,043) 29,958 $100,109 701 (68,739) 32,071 LIABILITIES Non-current Long term debt (Notes 18 and 22) Share-based payments (Note 17) Deferred income taxes (Note 9) 687 4,745 5,432 1,342 238 6,331 7,911 Current 4,100 1,214 Accounts payable and accrued liabilities (Notes 19 and 22) Dividends payable (Notes 20 and 22) Current portion of long-tem debt (Notes 18 and 22) Current taxes payable (Note 9) 3,978 1,214 700 426 6,318 1,953 7,267 Commitments (Note 26) Total liabilities and shareholders' equity $ 42,657 46,300 BIG ROCK BREWERY INC.'S 2013 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME EXHIBIT 10-17B BIG ROCK BREWERY INC. Consolidated Statements of Comprehensive Income In thousands of Canadian dollars, except per share amounts) Year ended December 30, 2013 41,587 20,260 21,327 December 30, Net revenue (Notes 3.2 and 4) Cost of sales (Notes 5 and 24) Gross profit Expenses 2012 46,057 21,149 24,908 12,910 4,821 314 18,045 3,282 13,987 4,945 358 19,290 5,618 93 351 147 5,729 426 1,168 4,135 Selling expenses (Notes 6 and 23) General and administrative (Notes 7 and 24) Depreciation and amortization Operating expenses Operating profit Finance costs (Note 8) Other income Other expenses Income before income taxes Current income tax expen Deferred income tax expense (recovery) (Note 9) Net income and comprehensive income for the period 286 109 3,450 2,485 (1,586) 2,551 se (Note 9) ECK BIT 10-17C BIG ROCK BREWERY INC.'S 2013 CONSOLIDATED STATEMENTS OF CASH FLOWS BIG ROCK BREWERY INC. Consolidated Statements of Cash Flows (In thousands of Canadian dollars) Year ended December 30, 2013 December 30, 2012 OPERATING ACTIVITIES Net income for the period ltems not affecting cash: $2,551 S 4,135 Depreciation and amortization Gain on sale of assets Stock-based compensation Deferred income tax expense (recovery) 3,157 (13) 640 (1,586) 3,148 7,897 3,228 (19) 446 1,168 1,496 10,454 Net change in non-cash working capital related to operations (note 25) Cash provided by operating activities FINANCING ACTIVITIES Dividend payments Principal repayments of long-term debt Cash received on exercise of option:s Cash used in financing activities INVESTING ACTIVITIES Purchase of property, plant and equipment Purchase of intangibles Proceeds from sale of equipment Cash used in investing activities Net increase (decrease) in cash Cash, beginning of year Cash, end of year 4,855) (2,042) (4,850) (641) 131 (5,360) (6,897) (2,992) (1,487) 34 (2,964) (1,964) 4,281 $ 2,317 19 (1,468) 3,626 655 $4,281 EXHIBIT 10-17D EXCERPT FROM BIG ROCK BREWERY INC.'S 2013 ANNUAL REPORT 21. CAPITAL RISK MANAGEMENT The Corporation includes as capital its common shares plus short-term and long-term debt, net of cash balances and has no extemally imposed capital requirements. The Corporation's objectives are to safeguard the Corpora tion's ability to continue as a going concern, in order to support the Corporation's normal operating requirements and to maintain a flexible capital structure which optimizes the costs of capital at an acceptable risk. This allows management to maximize the profitability of its existing assets and create long-term value and enhance returns for its shareholders Dec. 30 2013 $(2,317) Dec. 30 2012 $(4,281) 2,042 Bank indebtedness (cash) Total debt Shareholders' equity Shareholders' capital Contributed surplus Accumulated deficit 100,109 892 (71,043) 29,958 27,641 100,109 701 (68,739) 32,071 $29,832 Total shareholders' equity Total capitalization (total debt plus shareholders' equity, net of cash balances) The Corporation manages the capital structure through prudent levels of borrowing, cash-flow forecasting, and working capital management, and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Corporation may issue new shares, issue new debt, acquire or dispose of assets or adjust the amount of cash and cash equivalents. In order to facilitate the management of its capital requirements, the Corporation prepares annual expenditure budgets, which are approved by the Board of Directors. These budgets are updated as neces- sary depending on various factors, including capital deployment, results from operations, and general industry conditions In addition, the Corporation monitors its capital using ratios of 0 earnings before interest, taxes, depreciation and amortization ("EBITDA") to long-term debt and () EBITDA to interest, debt repayments and dividends EBITDA to interest, debt repayments and dividends is calculated by dividing the combined interest, debt repayments and dividend amounts by EBITDA and EBITDA to long-term debt is calculated by dividing long- term debt by EBITDA. These capital policies, which remain unchanged from prior periods, provide Big Rock with access to capital at a reasonable cost.