Examining Financial Statements

Examining Financial Statements

University of Phoenix

Principles of Accounting

ACC 300

March 17, 2008

Examining Financial Statements Paper

There are four main financial statements: 1) Balance Sheet; 2) Income Statement or Statement of Income; 3) Statement of Cash Flow and 4) Statement of Shareholders’ Equity. These financial statements show a company’s financial activities and reflect the overall financial position of a company. All of the financial statements are equally important. Many investors, banking institutions, and upper level managers rely on these financial documents to make purchasing, investing, and spending decisions. In this paper, we will look at the financial statements of Landry Company and define the financial statements of this company.

Net Income and the Statement of Income

Landry’s enjoyed a net income of $45,901,054 for the year ended 2003. This was an increase of over $5M from the previous year. This information can be found on the Statement of Income. The Statement of Income shows how much money a company made and spent over a period of time. The two basic components of financial statements are the balance sheet and the income statement, which are directly related to each other. The balance sheet should always be balanced (assets should equal liabilities plus equity) and the income statement summarizes over a period of time while the balance sheet summarizes at a specific point in time.

The components of a financial statement are broken down into two different sections: the Operating section and Non-Operating section. In the operating section, revenue is the first and main item listed on the income statement. The revenue listed on this financial statement, in the Operating section, reflects the cash earned from routine operating activities. This revenue is normally presented as sales minus sales discounts, returns, and allowances, followed by operating expenses.

In the Non-Operating section of the income statement, revenue is listed from revenues and gains from other than primary business activities (e.g. rent, patents). It also includes unusual gains and losses that are either unusual or infrequent, but not both (e.g. sale of securities or fixed assets), followed by expenses or losses not related to primary business operations.

Statement of Cash Flow

For the duration of the fiscal year 2003, Landry’s restaurant spent money on property and equipment additions. The property and equipment additions were recorded at cost with the amount being $162,894,783. It was reported on the Consolidated Statement of Cash Flows. The statement of cash flows explains how companies obtain and use cash during the accounting period. As expected with this type of financial statement the cash inflows and outflows are separated into three main categories. They are cash flows from operating activities, next was cash flows from investing activities, and third cash flows from financial actions. A disclosure of cash flow information for the period concerning interest and income taxes is also incorporated.

Balance Sheet

Year-end 2003, Landry’s total assets were $1,102,785. This information can be found on the Balance Sheet. The total is reflective of a significant growth increase in revenues, expenses and net income in 2003 as compared to 2002 and 2001. A balance sheet is like a still photograph which shows the firm’s