Examining Financial Statements - Landry’s Restaurants

Examining Financial Statements - Landry's Restaurants

Financial statement users around the globe use financial statements to evaluate the performance of companies (Fundamentals of Financial Accounting, 2006). In order to locate a company’s reported assets, liabilities, expenses and revenues, statement users rely on four types of financial statements. The four financial statements include: Balance Sheet, Income Statement, Statement of Retained Earnings, and Statement of Cash Flows (Fundamentals of Financial Accounting, 2006, p. 6). Each of these reports provides different information to the financial statement user. The Balance Sheet reports at a point in time: a company’s assets (what it owns), liabilities (what it owes) and stockholder’s equity (what is left over for the owners) (Fundamentals of Financial Accounting, 2006, p.7). The Income Statement shows whether a business made a profit (net income) during a specific period of time (Fundamentals of Financial Accounting, 2006, p. 10). The Statement of Retained Earnings illustrates what portions of the company’s earnings was paid to stockholders and retained by the company for future operations (Fundamentals of Financial Accounting, 2006, p.12). Finally, the Statement of Cash Flows reports summarizes how a business’ “operating, investing, and financial activities caused its cash balance to change over a particular range of time” (Fundamentals of Financial Accounting, 2006, p.13).

This paper examines the Annual Report of Landry’s Restaurants, Inc. Specifically, this paper demonstrates how certain financial elements can be located in Landry’s financial statements. The key financial components discussed include: (1) net income, (2) total assets, (3) property and equipment additions, and (4) stock options.

Income

To locate the net income for Landry’s Restaurants, a financial user would look at the Income Statement. As mentioned above, the Income Statement will report Landry’s net income (or profit) during a specific period. According to the 2003 Annual Report, in the financial statement titled “Consolidated statements of Income,” Landry’s Restaurants, Inc. reported a net income of $45,901,054 in 2003 (Fundamentals of Financial Accounting, 2006, p. 626).

In the text, net income is defined as being “equal to revenues minus expenses” (Fundamentals of Financial Accounting, 2006, p. 11). In Landry’s Income Statement, revenue is listed as a single figure (indicating one source of revenue). Examining the 2003 annual report, Landry’s Restaurant Inc. reported having revenues of $1, 105,755,057 (Fundamentals of Financial Accounting, 2006, p.11).

Landry’s expenses, however, are more complex. The Income Statement shows various expense categories, including: cost of revenue, labor, administration, depreciation and amortization. In this Income Statement, net income is determined by totaling the expense categories and subtracting from the total reported revenue. Landry’s total operating costs and expenses equal $1,037,338,2939 in 2003 (Fundamentals of Financial Accounting, 2006, p. 626).

Assets

Landry’s total assets are reported in its Balance Sheet. The Balance Sheet illustrates a company’s assets, liabilities and stockholder’s equity. On December 31, 2003, Landry’s Total Assets were valued at $1,102,785,506 (Fundamentals of Financial Accounting, 2006, p. 625).

The asset categories listed on Landry’s Balance Sheet include: cash and cash equivalents, accounts receivable, inventory, deferred taxes, total current assets, property and equipment, goodwill and other assets (Fundamentals of Financial Accounting, 2006, p. 625).

Property and Equipment Additions

To determine how much Landry has spent on property and equipment additions in 2003, a financial statement user would look to Landry’s Statement of Cash Flows. The Statement of Cash Flows shows the company’s operating and investment activities (Fundamentals of Financial Accounting, 2006). During 2003,