The consolidated statements of cash flows and related note disclosure for Le Château Inc. are in Exhibits 5-18A and B.

Required:
a. Determine the cash flow patterns for Le Ch̢teau. In total, how much did Le Ch̢teau۪s cash and cash equivalents change during 2014? Was this an increase or a decrease? How did this compare with the previous year?
b. How did Le Ch̢teau۪s net loss in 2014 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 inventory balance have on cash flows from operating activities in 2014? What does this tell you about the company€™s inventory balances? Does this cause any particular concerns given the nature of the company€™s operations?
d. What effect did the change in the company€™s trade and other payables have on cash flows from operating activities in 2014? What does this tell you about the balance owed to these creditors?
e. Calculate Le Ch̢teau۪s net free cash flow for 2014 and 2013. Is the trend positive or negative?
f. If you were a user of Le Château€™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 Le Château?

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LE CHATEAU INC.'S 2014 CONSOLIDATED STATEMENTS OF CASH FLOWS Le Chäteau Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended January 25, 2014 and January 26, 2013 (In thousands of Canadian dollars) 2014 2013 OPERATING ACTIVITIES Net loss Adjustments to determine net cash from operating activities (16,986) (8,717) Depreciation and amortization notes 8 and 9) Write-off and net impairment of property and equipment and intangible 18,723 19,574 assets [notes 8 and 91 Loss on disposal of property and equipment Inote 8 Amortization of deferred lease credits Deferred lease credits Stock-based compensation 2,142 108 1,285) 1,088 336 338 3,063 (23) 2,863) 28 (3,469) 10,320 1,897 (2,539) 39 978 (102) 2,714 (13) Finance costs Finance income Interest paid Interest received Income tax recovery 13 (6,722) (2,434) Net change in non-cash working capital items related to operations Inote 21) (3,030) (5,464) 2,108 (3,356) 6,340) 3,980 2,056 6,036 Income taxes refunded Cash flows related to operating activities FINANCING ACTIVITIES Increase in bank indebtedness Repayment of long-term debt Issue of share capital upon exercise of options Cash flows related to financing activities INVESTING ACTIVITIES Additions to property and equipment and intangible assets (notes 8 and 9 Proceeds from disposal of property and equipment [note 8) Cash flows related to investing activities Decrease in cash Cash, beginning of year Cash, end of year 17,482 13,600 (16,323) 159 9,337 (2,723) (6,318) (6,318) (337) 1,783 1,446 9,237) 514 (8,723) (5,410) 7,193 1,783 EBIT 5-188 EXCERPT FROM LE CHATEAU INC.'S 2013 ANNUAL REPORT 21. CHANGES IN NON-CASH WORKING CAPITAL The cash generated from (used for) non-cash working capital items is made up of changes related to operations in the following accounts January 25, 2014 January 26, 2013 447 (340) (3,893) (326) Accounts receivable Income taxes refundable Inventories Prepaid expenses Deferred finance costs Trade and other payables Deferred revenue Net change in non-cash working capital items 430 (360) (1,660) (402) (1,192) 154 (360) related to operations (3,030) (6,340)