Sant? Smoothie & Sweets Ltd. has been providing all-natural granola bars to Coffee Beans Ltd., a private company, on a weekly basis over the past two years. Coffee Beans, thrilled with the quality of goods and service it is receiving from Sant?, has approached the Koebels to join its team. Coffee Beans is expanding and hopes that the Koebels would consider the sale of Sant? Smoothie & Sweets Ltd. shares to Coffee Beans. In exchange, Janet, Brian, and Natalie would then become both shareholders and employees of Coffee Beans Ltd. Janet, Brian, and Natalie have worked hard to achieve the success of Sant? Smoothie & Sweets. They are reluctant to join another team unless they can be reasonably assured that there will be future growth in the business they are investing in. Selected information for Sant? Smoothie & Sweets and Coffee Beans follows:

Instructions

a. Calculate the net increase in cash and the amount of cash at the beginning of the year that would have been included on the statement of cash flows for each company.

b. Calculate free cash flow for each company.

c. Compare the provision and use of cash in each of the three activities?operating, investing, and financing?by each company.

d. Based on information provided in parts (a) and (b), identify why Coffee Beans is pursuing an investment in Sant? Smoothie & Sweets Ltd.

e. Based on information provided in parts (a) and (b), identify for the Koebels some of the issues they should consider and additional information they would require before making the decision to sell their shares and/or be employed by Coffee Beans Ltd.

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Santé Smoothie & Sweets Ltd. Year Ended May 31, 2022 Coffee Beans Ltd. Year Ended December 31, 2021 Coffee Beans Ltd. Year Ended December 31, 2020 $ 1,259,966 Profit $ 199,629 $ 1,465,466 Net cash provided by operating activities Net cash used by investing activities Net cash (used) provided by financing activities Cash, end of year Current liabilities Total liabilities Dividends paid $ 235,279 $ 1,137,650 $ 2,324,547 (3,036,676) (157,833) (4,545,728) (37,071) 199,443 31,121 7,406,647 4,469,552 5,190,005 10,398,638 955,201 470,983 5,046,240 7,076,968 81,551 120,000