1. Farmer Johnsons rate of return on assets (ROA) this year was 5.5% while his rate of return on equity (ROE) was 7%. Given this information, what can you generalize about the average interest rate Farmer Johnson is paying on his debt relative to the rates of return above? Briefly explain your answer.

2. Can an operation be profitable but have negative net cash flow? If yes, explain how this can happen? If no, explain why it cannot happen.