What is the formula for Cash Flow?

The formula for Cash Flow can be understood through its components. Cash Flow, in a restaurant context, is effectively represented by taking into account the actual cash generated from operations. The correct formula emphasizes the link between the operational profitability of the restaurant and the considerations for asset depreciation and amortization.

When you look at the formula that combines restaurant contribution with depreciation and amortization, it captures the essence of cash generated from the restaurant's core activities while considering the non-cash expenses involved. Restaurant contribution refers to the earnings before accounting for fixed costs, thus showing operational efficiency. Adding depreciation and amortization gives a clearer picture of cash available to the business, as these are accounting practices that do not involve cash outflows.

In contrast, other options focus on revenue versus costs in a way that does not accurately represent the flow of cash in the context of cash flow analysis. Revenue minus expenses or sales against fixed costs provides insight into profitability but may not fully illustrate cash flow, as they might not consider non-cash expenses impacted by operational structures. Current assets minus current liabilities, while indicative of financial health, does not adequately address cash flow from operations.

Overall, emphasizing restaurant contribution along with depreciation and amortization provides a more robust and comprehensive understanding of cash flow within the restaurant