Andrew Peller Limited is a leading producer and marketer of wines in Canada, with wineries in British Columbia, Ontario, and Nova Scotia. The companys March 31, 2020, balance sheet reported current assets of $214.1 million and current liabilities of $130.5 million, including bank indebtedness (negative cash balance) of $58.1 million. Andrew Peller Limited reported a profit for fiscal 2020 of $23.5 million. The company reported on its cash flow statement for 2020 that it generated $31.5 million of cash from operating activities. The company used $23.3 million in investing activities, primarily for the purchase of property, plant, and equipment. The companys financing activities used $8.2 million cash. The company paid dividends in the amount of $9.2 million during 2020.

Instructions

1. What was Andrew Peller Limiteds increase or decrease in cash during the year?

2. Do you believe that Andrew Peller Limiteds creditors should be worried about its lack of cash? Explain why or why not.

3. How is it possible for a company to report a profit of $23.5 million and generate $31.5 million of cash from its operating activities?

4. Calculate Andrew Peller Limiteds free cash flow for fiscal 2020. Explain what this free cash flow means.