Income and Cash Flows Statements

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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.

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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

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ROI=gains from investment-cost of investment/cost of investment

178567=667926-C

The cost of investment will be $489359

income statement analysis for the first year:
initial revenue increase by 0.1 total costs income
January 667926 0 667926 489359 178567
Feb. 667926 66792.6 734718.6 489359 245359.6
march 734718.6 73471.86 808190.5 489359 318831.5
April 808190.5 80819.05 889009.6 489359 399650.6
may 889009.6 88900.09 977909.7 489359 488550.7
June 977909.7 97790.9 1075701 489359 586341.6
July 1075701 107570.1 1183271 489359 693912.1
august 1183271 118327.1 1301598 489359 812239.1
sept 1301598 130159.8 1431758 489359 942398.8
October 1431758 143175.8 1574934 489359 1085575
November 1574934 157493.4 1732427 489359 1243068
Dec 1732427 173242.7 1905670 489359 1416311

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

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cash flows cash inflows net cash flow
misleneous restaurant food inventory petty cash income
January 1500 400 500 2400 2000 178567 180567 178167
Feb. 1500 400 500 2400 2000 245359.6 247359. 244959.
march 1500 400 500 2400 2000 318831. 320831. 318431.
April 1500 400 500 2400 2000 399650. 401650. 399250
may 1500 400 500 2400 2000 488550. 490550. 488150
June 1500 400 500 2400 2000 586341. 588341. 5859416
July 1500 400 500 2400 2000 693912. 695912. 6935121
august 1500 400 500 2400 2000 812298. 814298. 8118988
sept 1500 400 500 2400 2000 942398. 944398. 9419988
October 1500 400 500 2400 2000 1085575 108755 1085175
November 1500 400 500 2400 2000 1243068 124508 1242668
dec 1500 400 500 2400 2000 1416311 141831 1415911

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:

income statement analysis for the second year:
initials revenue increase by 0.1 total costs income
first quarter 667926 0 667926 489359 178567
second quarter 667926 10018.89 677944.9 489359 188585.9
third quarter 677944.9 101691.7 779636.6 489359 290277.6
fourth quarter 779636.6 116945.5 896582.1 489359 407223.1
income statement for third year:
q1 779636.6 0 779636.6 489359 290277.6
q2 779636.6 116945.5 896582.1 489359 407223.1
q3 896582.1 134487.3 1031069 489359 541710.4
q4 1031069 159160.4 1190229 489359 700870.4

Cash flow statements for the year 2 and three:

cash flows cash inflows net cash flow
misleneous restaurant food inventory petty cash income
q1 4500 1200 1500 7200 6000 178567 184567 177367
q2 4500 1200 1500 7200 6000 188585.9 194585.9 187385.9
q3 4500 1200 1500 7200 6000 290277 296277 289077
q4 4500 1200 1500 7200 6000 407223 413223 406023
cash flows cash inflows net cash flow
misleneous restaurant food inventory petty cash income
q1 4500 1200 1500 7200 6000 290277.6 296277.6 289077.6
q2 4500 1200 1500 7200 6000 407223.1 413223.1 406023.1
q3 4500 1200 1500 7200 6000 541710.4 547710.4 540510.4
q4 4500 1200 1500 7200 6000 700870.4 706870.4 699670.4

Analysis for the fourth and fifth year:

income statement analysis for the first year:
initial revenue increase by 0.15 total costs income
year 4 667926 12 8015112 489359 7525753
Year 5 67944.9 12 815338.8 489359 325979.8

Cash flow statement for the two years:

cash flows cash inflows net cash flow
misleneous restaurant food inventory petty cash income
year4 18000 4800 6000 28800 24000 7525753 7549753 7520953
year5 18000 4800 6000 28800 24000 325979.8 349979.8 321179.8

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BusinessEssay. (2022, March 16). Income and Cash Flows Statements. Retrieved from https://business-essay.com/income-and-cash-flows-statements/

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BusinessEssay. (2022, March 16). Income and Cash Flows Statements. https://business-essay.com/income-and-cash-flows-statements/

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"Income and Cash Flows Statements." BusinessEssay, 16 Mar. 2022, business-essay.com/income-and-cash-flows-statements/.

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BusinessEssay. (2022) 'Income and Cash Flows Statements'. 16 March.

References

BusinessEssay. 2022. "Income and Cash Flows Statements." March 16, 2022. https://business-essay.com/income-and-cash-flows-statements/.

1. BusinessEssay. "Income and Cash Flows Statements." March 16, 2022. https://business-essay.com/income-and-cash-flows-statements/.


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BusinessEssay. "Income and Cash Flows Statements." March 16, 2022. https://business-essay.com/income-and-cash-flows-statements/.