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The case study “Eat at my restaurant” enables a dissection, ratio examination, and analysis of the cash flow in Yum Brands, Panera Bread, and Starbucks. The purpose of the present discussion, therefore, is to analyze the strengths and potential of each through an analysis of net cash and income, as well as the data review.
Net Cash vs. Net Income
Unlike investment, net cash activities are generally accounted for in financial statements every quarter and year (Loth, 2011). Neither long-term capital nor the costs of investments are included in cash flow. EBITDA, when used for comparing cash flows from operating activities, can provide an insightful view of the way organizations finance short-term capitals (Harvey, 2012; Averkamp, n.d.a). Net income, on the other hand, is the outcome of cost-benefit deduction, which includes taxes, depreciation of property, interests, and costs of investments (Averkamp, n.d.b). According to GAAP, such income better indicates profits in the long run (Ro, 2013).
The companies have availed financial data necessary to carry out some DuPont equations, which were confined to net cash and income and other parameters. The equations will validate each of them within their markets’ framework.
Yum Brands increased its net cash by 8 percent from 2009 to 2010, which is especially significant because it occurred in internal cash rather than the one gained through outside operations. Net income showed a $95-billion rise, which is not as steep as the cash but still potentiates the company in the long run (Gibson, 2013). At the same time, the drop in cash flow and long-term debt maturity demonstrates that the brand has paid off its debt with a significant part of its capital. However, the company’s growth of cash flow per share almost doubled within this period, which speaks for Yum Brands as a strong and potent company.
In Panera, cash from operating activities demonstrated an increase almost 4 times larger than Yum’s, which is a positive sign. Net income increased by more than $24 million, which shows the company has potential. Additionally, Panera does not have debts and saw a $0.74 cash flow per share increase from 2009 to 2010 (Gibson, 2013). These factors speak for Panera Bread as a company of considerable strength and opportunities in the long run.
The operating activities cash growth in Starbucks was the highest of all companies: 59% within the 2009-2010 period; as with Yum Brands’ case, Starbucks generated this cash internally (Gibson, 2013). Net income has also increased by more than half a billion. Starbucks does not have debts to pay off, which is specifically evident when one looks at cash flow per share. The latter saw an increase by more than $0.3 in a years’ time. All these indicators show the strength and potential of Starbucks.
Cash flow issues
Cash flow does not seem to present issues for either company except for Panera, which allowed for increasing debt within the year. Considering the non-disclosure of any specificities, the decrease in operating cash flow remains unexplained but can hint at possible fund misuse.
Net income remains the factor to delineate each company’s profitability in the long run. Whereas each company has excellent indicators for each category, Starbucks is the one to show the steepest climb in the net income within the given period.
Averkamp, H. (n.d.a). What is cash from operating activities? Web.
Averkamp, H. (n.d.b). What is net income? Web.
Gibson, C. H. (2013). Financial reporting & analysis: using financial accounting information (13th ed.). Mason, OH: South-Western.
Harvey, C. R. (2012). EBITDA. Web.
Loth, R. (2011). Analyze Cash Flow the Easy Way. Web.
Ro, S. (2013). Chart of The Day: Here’s How You Should Think About ‘Adjusted’ Earnings. Web.
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