EAT AT MY RESTAURANT—CASH FLOW
With this case, we review the cash flow of several restaurant companies. The restaurant companies reviewed and the year end dates are as follows:
1. Yum Brands, Inc.
(December 30, 2008; December 30, 2007)
‘‘Through the five concepts of KFC, Pizza Hut, Taco Bell, LJS and A & W (the ‘‘Concepts’’) the company develops, operates, franchises and licenses a world system of restaurants which prepare, package and sell a menu of competitively priced food items.’’ 10 K
2. Panera Bread
(December 30, 2008; December 25, 2007)
‘‘As of December 30, 2008, Panera operated and through franchise agreements with 39 franchisee groups, 1,252 cafes.’’ 10 K
3. Starbucks
(September 28, 2008; September 30, 2007)
‘‘Starbucks Corporation was formed in 1985 and today is the world’s leading roaster and retailer of specialty coffee.’’ 10 K
|
Yum Brands, Inc. |
Panera Bread |
Starbucks* |
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|
Data Reviewed |
2008 |
2007 |
2008 |
2007 |
2008 |
2007 |
|
(In millions) |
(In thousands) |
(In millions) |
||||
|
Net cash provided by operating |
1,521 |
1,551 |
156,282 |
154,014 |
1,258.70 |
1,331.20 |
|
Net income |
964 |
909 |
67,436 |
57,456 |
315.5 |
672.6 |
|
Operating cash flow/current maturities |
60.84 |
5.39 |
No current maturities of long term |
176.36* |
187.20* |
|
|
Operating cash flow/total debt |
22.92 |
25.64 |
87.43 |
60.97 |
39.56 |
43.51 |
|
Operating cash flow per share |
3.1 |
2.87 |
5.14 |
4.79 |
1.7 |
1.73 |
|
Operating cash flow/cash dividends |
4.72 |
5.68 |
No cash dividends |
No cash dividends |
||
Required
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.
b. Comment on the data reviewed for each firm.
c. Do any of these firms appear to have a cash flow problem? Comment.