The Cheesecake Factory has thousands of guests each day who pay immediately after finishing their meals. The Cheesecake Factory also spends cash to pay for the food it serves, employees’ wages, and other expenses. The company might also use cash to set up new restaurant locations and renovate older facilities. In addition, The Cheesecake Factory has the option to declare cash dividends and buy treasury stock. It might borrow cash via long-term loans or it might issue common stock for cash. Below are the consolidated statements of cash flows for The Cheesecake Factory Incorporated for the fiscal years 2014–2016.1

Requirements

1. Which activity (operating, investing, or financing) generated the most cash for The Cheesecake Factory in 2016, 2015, and 2014?

2. What specific investing or financing activity used the most cash in 2016? In 2015? In 2014?

3. Did The Cheesecake Factory’s overall cash and cash equivalents balance increase, decrease, or stay the same from 2014 to 2015? From 2015 to 2016?

4. Using only the statement of cash flows as evidence, does The Cheesecake Factory appear to be a healthy company? Why or why not?

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A1 The Cheesecake Factory Incorporated Fiscal year Statement of Cash Flows (adapted for educational use) (In thousands) 3 4 Cash flows from operating activities: Net Income Adjustments to reconcile net income to cash 2016 2015 2014 $ 139,494 $ 116,523 $ 101,276 163,026 $ 302,520 $ 235,423 $ 239,649 118,900 138,373 Cash provided by operating activities 8 Cash flows from investing activities: Additions to property and equipment Additions to intangible assets (115,821) (1,640) (42,000) $ (159,461) $ (155,701) | $ (115,861) (153,941) (1,760) (113,982) (1,879) 10 Investments in unconsolidated affiliates 11 Cash used in investing activities 12 13 Cash flows from financing activities: 14 Miscellaneous borrowings/repayments 55,764 (42,371) (146,467) 51,454 (35,969) (109,371) $ (133,074) $ (93,886) $ (127,521) 9,985 $ (14,164) $ 58,018 43,854 $ 58,018 43,294 (30,332) (140,483) Cash dividends paid 15 16 Treasury stock purchases 17 Cash used in financing activities Net change in cash and cash equivalents 19 Cash and cash equivalents at beginning of period 20 Cash and cash equivalents at end of period 21 (3,733) 61,751 18 43,854 53,839 $ %24