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Cash Flow - Case Study Example

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CASH FLOW Introduction The case “Eat at My Restaurant” reviews the cash flow of several companies such as Panera Bread, Starbucks, and Yum Brands. Starbucks is the premier retailer and roaster of speciality coffee and it operates in more than 50 countries around the world…
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Cash Flow

Download file to see previous pages... Yum Brands Inc. operates six in different segments including YUM Restaurant International, Pizza Hut (US), Taco Bell (US), KFC (US), A&W All American Food Restaurant (US), YUM Restaurant China and LJS Long John Silver’s (US). This paper comments on the difference between net cash provided by operating activities and net income by speculating on which is likely to be superior sign of profitability for the firms in the long term. The paper also comments on the data reviewed by each firm and analyze cash flow position of each firm. After analyzing the cash flows of the companies as per the information given in the case, the paper finally ends with a conclusion that comments on whether these companies has any cash flow problems or not. Net Cash Position of the Firms According to the given case study, the financial statements of the three restaurant firms for the financial year 2009 and 2010 was extracted from their respective form 10-K annual reports and the following results were found: It is important to mention that the net income of all three companies include non-controlling interest (that is, non-equity shareholders). From the above analyses it is clear that there is difference between net cash provided operating activities and net income including non-controlling interest. ...
On the other hand, net income including non-controlling interest is the income of the company from all its operations and also includes external finances such as non-controlling interest (which is basically earnings from preferential equity or other fixed financial instruments). The value is not adjusted for non-cash incomes or expenditures such as working capital and depreciation (Porter and Norton, 2010, pp.666-676). Also, it does not classify exact cash amount realised from operations. This is main reason as to why there was difference between net income including non-controlling interest and net cash provided operating activities. Regarding the speculation of which number is likely to be better indicator of long term profitability, it is generally believed that net cash provided by operating activities is better indicator. This is because it is useful to determine whether the firms will be able to make necessary future investment and pay its dues in the long term. The companies may look great from their balance sheet and income statements, but if there isn’t sufficient cash, then it might run risk of liquidation (Plewa, 1995, pp.1-18). Data Review of the Firms The summarized data review of the three firms reveals the following results: Operating cash flow/total debt – It represents the amount of total debt that could be covered from the cash flows generated by the firms from operating activities. Higher values indicate that there is sufficient cash to repay total debt. Among the three firms under observation, this ratio was highest for Panera Bread and there was a general increasing trend in the values. Operating cash flow per share – It indicates exactly how much of ...Download file to see next pagesRead More
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