Eat at my restaurant cash flow Essay Example | Topics and Well Written Essays - 750 words

Eat at my restaurant cash flow - Essay Example Net income values are a good indicator of the business progress. Obtained via accrual accounting, net income value shows the net profits or losses that the company achieves in the specified period. Moreover, net income values can easily be obtained from the income statement and represents the difference between all accounting revenues both direct and indirect and all accounting expenses. As matter of fact, many investors depend on net income figures to make investment decisions. Perceptibly, dividends are always proportional to net income. Therefore, if the trend of net income figure is increasing then the company can attracts investors due to expected rise of the shares. The implication is that, the firm can easily access capital, and to be precise equity, hence stands a better chance to expand. However, profitability and insolvency is not always guaranteed by positive net income figures. Note that, allow net income values could be as a result of a high expenses figure which might h ave originated from high depreciation of assets. If the value of these expenses is one time, or rather does not influence s operational saes, then the net income figure falsely predicts the firm’s financial status. It’s to the opinion of many scholars that cash dictates financial position and thus, cash flow predicts long term profitability. Literary a positive net cash flow from operating activities implies that the business is collecting more cash that it’s spending and positive trend predicts a bright future.