Andrew Peller Limited is a leading producer and marketer of quality wines in Canada, with wineries in British Columbia, Ontario, and Nova Scotia. The company’s March 31, 2012, balance sheet reported current assets of $137.4 million and current liabilities of $102.5 million, including bank indebtedness (negative cash balance) of $57.5 million. Andrew Peller Limited reported a profit for fiscal 2012 of $13 million. The company reported on its cash flow statement for 2013 that it generated $7.0 million of cash from operating activities. The company used $9.2 million in investing activities, primarily for the purchase of property and equipment. The company’s financing activities provided $2.2 million cash. The company paid dividends in the amount of $4.9 million during 2012.

Instructions
(a) What was Andrew Peller Limited’s increase or decrease in cash during the year?
(b) Do you believe that Andrew Peller Limited’s creditors should be worried about its lack of cash? Explain why or why not.
(c) How is it possible for a company to report a profit of $13 million and generate $7 million of cash from its operating activities?
(d) Calculate Andrew Peller Limited’s free cash flow for fiscal 2012. Explain what this free cash flow means.