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Analysis of “Eat at My Restaurant – Cash Flow”
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…

While net cash is critical to determine the ability of the organization to meet its immediate requirements, the non-cash factors that are included in the net income calculation portray a more accurate view of the long-term profitability. Also because of the timing differences between when revenue and expenses are recognized, the accrual method behind the net income model will produce visibility that is more accurate. For example, a month that produces low volume of sales and a high volume of receivable could produce a positive cash flow when in reality that low sales volume will negatively affect the subsequent months. This variance would be visible in the net income but would not be visible in net cash.
Case Study Company Comparison
Yum Brands, Inc.
In the two years presented in the case study (2009-2010), Yum Brands, Inc. saw a significant decline in its operating cash flow/current maturities of long-term debt and current notes payable. This indicates that they are less able to meet their current debt obligation. However, when looking at operating cash flow/total debt, there is an increase of 7.3% showing that Yum Brands, Inc. is more able to cover its debt with operating cash. A review of the operating cash flow per share shows an increase of $1.14 showing an improvement in its ability to make capital expense decisions and pay dividends to its shareholders. Finally, Yum Brands, Inc. a .9 increase in operating cash flow/cash

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