Question

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 Château. In total, how much did Le Château’s 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 Château’s 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 Château’s 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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  • CreatedJune 11, 2015
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