1. Read and briefly summarize the case.

1. Based on the information presented in the case, especially Exhibits 8.1 and 8.2, what is your assessment of the financial performance of Horniman Horticulture? What is going right with this business? What concerns you?

1. What explains the erosion of the cash balance? Where is the cash going? (Hint: Find operating cash flow (OCF) and free cash flow (FCF) in 2015.)

1. What do you expect the financial position of the business to be in 2016? Extend the financial statements through 2016, assuming that Bob Browns grows revenue by 30%. Will strong business performance in 2016 improve the cash position? (Note: To make the balance sheet balance, define cash as equal to (Current liability + Net worth) (Accounts receivable + Inventory + OCA + Net fixed assets)

3. 	2012	2013	2014	2015	2016 (Exp.)	Assumptions
   Profit and loss statement
   Revenue	788.5	807.6	908.2	1,048.8		Sales growth 30%
   Cost of goods sold	402.9	428.8	437.7	503.4		Varies directly with sales
   Gross profit	385.6	378.8	470.5	545.4
   SG&A expense	301.2	302.0	356.0	404.5		Varies directly with sales
   Depreciation	34.2	38.4	36.3	40.9		Case footnote #4
   Operating profit	50.2	38.4	78.2	100.0
   Taxes	17.6	13.1	26.2	39.2		Tax rate 39.2%
   Net profit	32.6	25.3	52.0	60.8
   Balance sheet
   Cash	120.1	105.2	66.8	9.4
   Accounts receivable	90.6	99.5	119.5	146.4		Varies directly with sales
   Inventory	468.3	507.6	523.4	656.9		Varies directly with sales
   Other current assets	20.9	19.3	22.6	20.9		Varies directly with sales
   Current assets	699.9	731.6	732.3	833.6
   Net fixed assets	332.1	332.5	384.3	347.9		NFA + Capex - Depreciation
   Total assets	1,032.0	1,064.1	1,116.6	1,181.5
   Accounts payable	6.0	5.3	4.5	5.0		Varies directly with sales
   Wages payable	19.7	22.0	22.1	24.4		Varies directly with sales
   Other payables	10.2	15.4	16.6	17.9		Varies directly with sales
   Current liabilities	35.9	42.7	43.2	47.3
   Net worth	996.1	1,021.4	1,073.4	1,134.2
   Capital expenditure	22.0	38.8	88.1	4.5		Case footnote #4
   Purchases	140.8	145.2	161.2	185.1		Varies directly with sales
   Net working capital	664.0	688.9	689.1	786.3	840.7	CA CL