Cash Flow Analysis for a Fast-Food Restaurant

A cash flow analysis summarizes your cash collections and cash payments for a specific time period. You may handle cash from sales, loans and capital contributions from investors in the course of running your fast-food restaurant. You will spend on items such as purchases, wages and debt repayments. Cash flow analysis classifies the various cash inflow and outflow items into three broad categories: operations, investments and funding.

Add your total cash receipts for the period. Notably, cash sale transactions account for much of the revenue of a fast-food restaurant. The Internal Revenue Service elaborates that “many restaurants, especially smaller or closely held ones, are cash intensive and employees and/or owners handle large volumes of cash transactions every day.” Add your total payments for the period under review. Some of the expenses you are likely to incur in your fast-food restaurant include license fees, delivery charges, purchases of food items and packaging materials. Unlike sales, expenses of the fast-food restaurant may comprise a combination of cash and credit purchases. Therefore, your total payments from operations are the cash purchases and credit purchases due for payment within the period.

Compute your total cash inflows and cash outflows from investment activities. Cash flow from investments concern the sale and purchase of long-term assets, such as kitchen equipment and delivery vans, for your restaurant business. Investment activities where capital asset purchases exceed the sale of fixed assets usually generate negative cash flows. The 10th edition of Accounting Concepts and Applications estimates about 80 percent of U.S. companies report negative cash flows that result from investing activities.

Calculate your cash flow from financing activities. Business capital for a fast-food restaurant may cut across various finance sources, such as equity finance and long-term loans. Cash receipts from lenders or shareholders generate cash inflows, while dividends or debt repayments generate cash outflows.

Add the total cash inflows and cash outflows from operations, investments and funding activities. The difference between the cash inflows and cash outflows will be the net cash flows for your fast-food restaurant.