Introduction
The income and cash flow statements are very important statements in relation to the short term and long term performance evaluation of any business organizations and also allow the business to formulate strategies that align to the performance objectives of the business. The income statement measures the actual performance of the business over a specific period of time and hence allows the management to determine the future direction of the business.
The cash flow statement on the other hand relates to the cash position of the business and allows the business to plan for future liquidity needs of the company. Unlike the income statement that deals with all items that drive revenues and the expenditures associated with the revenues, the cash flow statement only deal with cash and cash equivalents and hence serves as the best financial statement for the analysis of the liquidity position of the business.
This paper will therefore analyze the income statement and the cash flows of the business on a monthly, quarterly and yearly basis using the information provided and determine whether the business venture is viable or not.
Income statements
This statement basically provides information about operating and non operating activities of the business and evaluates the incomes that the business is able to achieve by matching the revenues against the expenses.
Expenses will be as follows:
- Set up expenses= $25132.75
- Petty cash= $2000
- Restaurant suppliers=$400
- Food inventory=500 per month this will translate to 500*12=$6000 per year
- Miscellaneous expenses = $1500
Revenues for the company:
- Revenues=capacity*table turn over*check per person
- Initial capacity =250
- Additional seats =16
- Total capacity =266
- Turn over ratio =12
- Check per person=1 hour
- Total number of hours per day=13.5
- Revenues =266*1*12=3192*13.5/2=21546*31= $ 667926
The return on investment for the month of January was 178567.75
ROI=gains from investment-cost of investment/cost of investment
178567=667926-C
The cost of investment will be $489359
Cash flow statements
This relates to cash and cash equivalents items in the business. The following statement shows the cash flow statement of the business for the first year:
Cash out flows
Restaurant suppliers 400
Miscellaneous expense 1500
Food inventory 500
From the income statement and the cash flows provided the business has been able to maintain stable cash flow growth over the period.
Second year and third year performance:
2nd year:
Cash flow statements for the year 2 and three:
Analysis for the fourth and fifth year:
Cash flow statement for the two years: