FIN400 – Analyzing Financial Statements
June 28, 2013
Analysis of “Eat at My Restaurant – Cash Flow”
Understanding the flow of cash within an organization is critical to knowing the health of an organization. Without this understanding, a business may run into a situation where even though they are profitable, they may not have enough cash on hand to meet their obligations. This paper will look at the case study Eat at My Restaurant – Cash Flow (Gibson, 2013) and will analyze the difference between net cash provided by operating activities and net income and determine which a better indicator of long-term profitability is. It will then provide an analysis of the cash flow …show more content…
They did however have 17.27% decrease in their ability to meet their total debt burden with operating cash. Panera Bread did show an increase of $0.74 in operating cash flow per share indicating an improved ability to make capital purchase decisions and pay dividends to its shareholders. Panera Bread did not make any dividend payments in either year.
In 2009 and 2010, Starbuck also did not have any long-term debt mature or have any current notes payable. However, they did show a 7.94% increase in their operating cash flow/total debt ratio. This indicates an improved ability to cover their total debt with operating cash flow. During this same period, Starbucks had an increase of $0.37 in operating cash flow per share indicating an improved ability to make capital purchase decisions and pay dividends to its shareholders. Although they did not pay any dividends in 2009, they did show an increase of 9.97 in operating cash flow/cash dividends in 2010. This shows that they are more able to pay dividends with yearly operating cash.
Cash Flow Woes
While Panera Bread does show an increase of 28.5% in net income-including noncontrolling interest, they are only showing an increase of 10.6% in net cash provided by operating activities. This combined with a 17.27% decrease in their operating cash flow/total debt ratio could