Discussion:
Read and complete case study, "Eat at My Restaurant" in your text. Answer the questions following the case study.
a) Comment on the difference between net cash provided by operating activities and net income. Speculate on which number is likely to be the better indicator of long-term profitability. For example net income and cash provided by operating income. One of these predicts long-term profitability according to GAAP. Identify and explain which one predicts the long term profitability of a company (Net income or cash provided by operating income).
b) Comment on the data reviewed for each firm. Class, this means you are commenting or analyzing the fluctuation for each company based on the following:
- net cash provided by operating activities. For example, Yum Brands, Inc net cash provided by operating activities decreased by $30m which indicates approximately 2% reduction in net cash. Panera's net cash provided by operating activities increased a little over $2k representing approximately 1% total increase and so on. Continue your analysis on the following areas by identifying the fluctuations:
- net income
- operating cash flow/current maturities of long-term debt and current notes payable
- operating cash flow/total debt
- operating cash flow per share
- operating cash flow/cash dividends
c) Do any of the firms appear to have a cash flow problem? Comment.