PEBON GINSENG

Rosemarie Obomsawin had discovered an entire new world when she accepted a scholarship to attend school

in South Africa. She often spent time with the other ex$-$patriots and discovered the traditional Chinese use of

ginseng and how Canadian ginseng was desirable as it had the most balanced mix of the cited benefits of the herb.

Obomsawin's knew of several suppliers in her native land of Quebec, Canada and began importing the Ginseng

to re$-$distribute globally. Like Sengupta, she was elated to see her first$-$year sales of $$550,000$ grow to $$2,700,000$

in the next year. She was grateful that her suppliers could scale up and still charge the same for the cost of goods

sold. Obomsawin did not understand how after so much investment she could still need more cash.

REQUIRED:

Keita's job at SASBF was to teach the business owners' the value of the statement of cash flows and to assist them

in interpreting the statement. Please explain the following to the business owners:

$1$: What are sources and uses of cash, how are they indicated on the statement of cash flows?

$2$: Why are non$-$cash items added back to the income line in the operations section?

$3$: What does a statement of cash flow measure? Why is cash flow management important?

For each of the statements please indicate:

a$.$ If net income is a source or use of cash and give a dollar amount for the cash from net income for each year.

b$.$ What are the major sources and uses of cash within operations? Are these expected and do you think they

are sustainable in the long$-$term?

c$.$ What are the major sources and uses of cash including financing and investing activities? Are these normal

for a business and do you think they are sustainable in the long$-$term?

d$.$ How do you feel about the overall management of the business?

e$.$ Why are they running out of cash?Three Companies out of Cash