Prepare Financial Statement Analysis

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** See ATTACHED file for complete details **

Principles of Accounting, Revised Edition, by Benjamin, Francia, and Strawser.

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Ratio#1 is provided to you as an example.

Ratio Name Purpose of Ratio Ratio Answer What do the ratios tell you about Landry's financial performance?
2003 2002
1 Net Profit Margin Computes the percentage of sales the company keeps after deducting expenses. . 4.2% 4.6%
Sales increased from $41.5 million in 2002 to $45.9 million in 2003. However, Landry's net profit margin declined from 4.6% in 2002 to 4.2% in 2003. This decrease in net profit margin is primarily due to a decline in Landry's gross profit percentage. Gross profit percentage is the amount of profit after deducting the cost of Landry's operations. This means Landry's cost of providing restaurant services (food and service costs) increased more than Landry's sales. This could be due to Landry's opening new restaurants which incur full operating costs but the new restaurants need to build sales.

2 Gross Profit Percentage Computes the percentage of sales the company keeps after deducting cost of revenues
70.9%
71.2%
Landry's gross profit has been declined from 71.2% to 70.9% in 2003. It is a slight decrease even thoudh sales of Landry has been increased from $894.8 million in 2002 to $1,105.8 million in 2003. The decrease may result from the increase in Landry's cost of revenues, which increased more than the increase in sales. This could be due to Landry's opening new restaurants, which incur full operating costs but the new restaurants need to build sales.

3 Fixed Asset Turnover Computes the productivity of the company
1.2
1.3
In 2002, Landry can use its fixed assets to generate approximately $1.3 of revenue by each dollar spent on fixed assets while in 2003, this ratio has been reduced to ...