Exhibits 5-14A and B contain the consolidated statements of cash flows and related note disclosure for The Second Cup Ltd.

Required:
a. In total, how much did Second Cup€™s cash and cash equivalents change during 2013? Was this an increase or a decrease? How did this compare with the previous year?
b. Did Second Cup have net income or a net loss in 2013? How did this compare with the cash flows from operating activities? What was the largest difference between these two amounts?
c. What effect did the change in the company€™s accounts payable and accrued liabilities have on cash flows from operating activities in 2013? What does this tell you about the balance owed to these creditors?
d. Did the balance of outstanding gift cards increase or decrease during 2013? Was this considered to be an inflow or an outflow of cash?
e. Did Second Cup purchase property, plant, and equipment during 2013? Did the company receive any proceeds from the sale of property, plant, and equipment during the period?
f. Calculate Second Cup€™s net free cash flow for 2013 and 2012. Is the trend positive or negative?
g. Second Cup€™s total liabilities were $31,376 at December 28, 2013, and $31,980 at December 29, 2012.
Determine the company€™s cash flows to total liabilities ratio. Comment on the change year over year.
h. If you were a user of Second Cup€™s financial statements€”a banker or an investor€”how would you interpret the company€™s cash flow pattern? How would you assess the risk of a loan to or an investment in Second Cup? Do you think the company is growing rapidly?

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HBIT 5-14A THE SECOND CUP LTD.'S 2013 STATEMENTS OF CASH FLOWS STATEMENTS OF CASH FLOWS For the periods ended December 28, 2013 and December 29, 2012 (Expressed in thousands of Canadian dollars) 2013 2012 CASH PROVIDED BY (USED IN) Operating activities Loss for the period ltems not involving cash (7,369) $(9,404) Depreciation of property and equipment 749 502 13,552 38 (116) 69 (1,772) 197 716 451 15,656 82 (89) Amortization of intangible assets Impairment charges Amortization of deferred financing charges Amortization of provisions Amortization of leasehold inducements (993) 70 (206) (1,159) 5,150 Deferred income taxes Gain) Loss on disposal of capital related items Movement in fair value of interest rate swap Changes in non-cash working capital (note 21) Cash provided by operating activities Investing activities Proceeds from disposal of capital related items Cash payments for capital expenditures (note 21) Proceeds from repayment Proceeds from repayment of notes receivable Investment in notes receivable Cash used by investing activities Financing activities Dividends paid to shareholders Repayment of note payable Deferred financing charges Payments on long-term lease Cash used by financing Increase (decrease) in cash and cash equivalents during the period Cash and cash equivalents- Beginning of the period Cash and cash equivalents- End of the period 2,178 7,678 350 (1,938) 36 185 1,240 (2,904) of leases receivable (10) (1,661) 1,367) (5,298) (18) (50) (3,367) (29) activities (3,396) 2,621 3,880 6,501 (5,368) 1,585) 5,465 3,880 Supplemental cash flow information is provided in note 21 See accompanying notes to the financial statements EXCERPT FROM THE SECOND CUP LTD.'S 2013 ANNUAL REPORT 21. SUPPLEMENTAL CASH FLOW INFORMATION 2013 2012 Changes in non-cash working capital (inflow (outflow): Trade and other receivables Notes and leases receivable Inventories Prepaid expenses and other assets Accounts payable and accrued liabilities Provisions Other liabilities Gift card liability Deposits from franchise partners Income taxes S 248 248 14 505 1,463 1,212 (65) $ 722 (400) (58) (501) 780) 349 46 207 447 (1,191) $(1,159) (602) (180) S 2,178 Cash payments for capital expenditures Purchase of property and equipment Purchase of intangible assets $(2,117) (787) $2,904) $(1,758) (180) $(1,938) Supplementary information Interest paid Income taxes paid S 522 S 1,687 $ 689 $2,835