What was the net cash provided by Chesters' operating activities in 2023?
Chesters Franchise · 2025 FDDAnswer from 2025 FDD Document
LOWS FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
| CASH FLOWS FROM OPERATING ACTIVITIES | _ | _ | |
|---|---|---|---|
| Net income | $ (69,699) | $ | 2,582,783 |
| Adjustments to reconcile net income to net cash | |||
| provided by operating activities: | |||
| Loss on disposal of fixed assets | 9,969 | - | |
| Amortization and depreciation | 522,927 | 462,783 | |
| Amortization of operating lease right-of-use assets | 189,709 | 387,265 | |
| Changes in operating assets and liabilities: | (4 = 00 000) | ||
| Accounts receivable | 3,642,762 | (1,563,980) | |
| Other receivables | (421,459) | (400,405) | |
| Due from related parties | (237,110) | (433,495) | |
| Inventories | 1,247,308 | (116,596) | |
| Prepaid expenses and other current assets | (89,469) (1,834,402) | (17,181) | |
| Accounts payable Accrued liabilities | 784,862 | 2,184,712 (79,688) | |
| Customer deposits | (248,670) | 75,943 | |
| Operating lease liabilities | (181,240) | (364,784) | |
| Unearned franchise fees | 54,450 | (88,400) | |
| Other long-term liabilities | 174,238 | (00,400) | |
| Net cash provided |
Source: Item 21 — **FINANCIAL STATEMENTS (FDD page 48)
What This Means (2025 FDD)
According to Chesters' 2025 Franchise Disclosure Document, the net cash provided by operating activities in 2023 was $3,029,362. This figure represents the cash Chesters generated from its core business operations during that year.
To arrive at this number, Chesters started with its net income of $2,582,783 and then made several adjustments. These adjustments included adding back non-cash expenses like amortization and depreciation ($462,783 and $387,265 respectively) and accounting for changes in various asset and liability accounts. For instance, there were adjustments for accounts receivable (-$1,563,980), inventories (-$116,596), accounts payable ($2,184,712), and unearned franchise fees (-$88,400). These adjustments convert net income from an accrual basis to a cash basis, providing a clearer picture of the actual cash flow.
For a prospective Chesters franchisee, understanding the net cash provided by operating activities is crucial. It indicates the financial health and stability of the franchisor. A positive and growing number suggests that Chesters is effectively managing its cash flow, which can be a good sign for franchisees who rely on the franchisor's support and brand strength. However, it is important to also review the individual components of this calculation to understand what factors are driving the overall cash flow.