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DISCUSSION BOARD #2: CASHFLOW ANALYSIS OF CHIPOTLE MEXICAN GRILL,
INC.
Discussion Board #2: Cashflow Analysis of Chipotle Mexican Grill, Inc.
Javier E. Caycedo Medina
School of Business, Liberty University Online
Author Note
Javier E. Caycedo Medina
I have no knonw conflict of interest to disclose.
Correspondence concerning this article should be addressed to Javier E. Caycedo Medina
Email: kcaycedo@liberty.edu
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DISCUSSION BOARD #2: CASHFLOW ANALYSIS OF CHIPOTLE MEXICAN GRILL,
INC.
Discussion Board #2: Cashflow Analysis of Chipotle Mexican Grill, Inc.
Investors are constantly looking at companies’ cash flows, to evaluate and see how fast a
company can generate cash. An increase in cash demonstrate to the shareholders and prospective
investors that the company is able to create earnings, contribute to investments, pay dividends,
and even pay debt quickly. Chipotle Mexican Grill, Inc. (CMG), has had a very irregular cash
flow during the past years. However, there has been an increase in the company’s free cash flow
in the past three years, which demonstrates that not only the company has been able to increase
sales, but also, they have been able to minimize expenses.
Operating Activities
The operating activities, located in the in the statement of cash flows, indicates the
amount of cashed used or earned from the operations of a company. According to an article of
the Wall Street Journal, companies should always develop treasury plans for cash administration
as a part of their risk management strategy (Cash Management Strategies to Bolster Supply
Chains, 2020). Overall, CMG’s ability to grow cash from operations have been relevant.
However, in 2016 CMG had a major crash in operations due to the food-safety related crisis the
company suffered related to norovirus (Jargon, 2017). As it is shown in the chart 1 below, in
2016 the company did not generate enough revenues to create significant cash from the daily
operations, in comparison with other years. On the other hand, the company has been able to
raise their reputation, and in 2019 CMG has significantly increased their cash flowing from
operations.
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DISCUSSION BOARD #2: CASHFLOW ANALYSIS OF CHIPOTLE MEXICAN GRILL,
INC.
Chart 1
Investing and Financing Activities
A company that is capable to make investments with a high risk, and still be able to
generate a positive cash flow is extremely attractive to future investors, as well as very satisfying
for shareholders. According to an article by the Investor’s Business Daily, CMG “Chipotle stock
rallied more than 120% from its December 2018 low through mid-September 2019” (Gondo,
2020). CMG has recently shown an ability to ensure a high return on investment, and a strong
inclination towards the importance of investing (see chart 2).
Investors also should look at the companies’ financing activities to evaluate the
companies’ methods of paying for their investments. As mentioned before, CMG suffered a
major crisis related to food safety in 2016. This issue not only decreased the sales of the
company, but also led the company to acquire more treasury stock as a result of a need to finance
the comapy’s operation (10-k, 2017). However, in the following years, the company was able to
get back up, and sustain normal levels of financing operations (See chart 2).
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DISCUSSION BOARD #2: CASHFLOW ANALYSIS OF CHIPOTLE MEXICAN GRILL,
INC.
Chart 2
Free Cash Flow
Despite the challenges in 2016, CMG has been able to maintain an average of 10%
growth in their operating income. Even though having a significant amount of free cash flow
could mean that the company is not properly leveraging its assets (King, n.d.). CMG has shown
an increasing trend in their free cash flow the past three years of operations (See chart 3). This
means that the company generating cash that potentially could be allocated to the investors,
however it possibly is not.
Chart 3
Overall, CMG is in a very strong position when we look at the current cash flow of the
market. Not only the sales of the company have increased on an average of 12% the past three
years, but also the company was able to manage an increase of almost 100% in the net income
from 2018 to 2019, positively affecting the company’s flow in cash accounts. Investors should
definitely look into investing in CMG shares, and other projects.
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DISCUSSION BOARD #2: CASHFLOW ANALYSIS OF CHIPOTLE MEXICAN GRILL,
INC.
Biblical Integration
The bible also tells us about the importance of producing more fruit with what the Lord
has given us. In Matthew 25, Jesus talk about the Parable of the Talents, and how the servants
that were given some talents, and came back with more were blesses. However, the servant that
did not do anything with the talent that was given to him, and came back with the same amount
given, was very unappreciated (Matthew 25: 14-30). This is a great example for investors to take
the opportunity and generate more money by investing in CMG.
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DISCUSSION BOARD #2: CASHFLOW ANALYSIS OF CHIPOTLE MEXICAN GRILL,
INC.
References
Cash Management Strategies to Bolster Supply Chains. (2020, April 14). Retrieved October 01,
2020, from https://deloitte.wsj.com/cfo/2020/04/14/cash-management-strategies-to-
bolster-supply-chains/
Chipotle Mexican Grill, Inc. (2017). 2016 annual report. https://ir.chipotle.com/
Gondo, N. (2020, September 21). Is Chipotle Stock A Buy Right Now, As It Tests Key Support?
https://www.investors.com/research/chipotle-stock-is-it-a-buy-right-now-earnings-
charts/.
Jargon, J. (2017, July 18). Chipotle Faces New Food-Safety Scare.
https://www.wsj.com/articles/chipotle-faces-new-food-safety-scare-1500395902.
King, S. (n.d.). Free Cash Flow – What Does It Mean for Business Growth? Retrieved October
01, 2020, from https://www.growthforce.com/blog/free-cash-flow-what-does-it-mean-for-
business-growth
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