Question: Colleen Fernandez, president of Rhino Enterprises, applied for a $175,000 loan from First Federal Bank. The bank requested financial statements from Rhino Enterprises as a basis for granting the loan. Colleen has told her accountant to provide the bank with a balance sheet. Colleen has decided to omit the other financial statements because there was a net loss during the past year.
Discuss the following questions:
1. Is Colleen behaving in a professional manner by omitting some of the financial statements?
• What types of information about their businesses would owners be willing to provide bankers? What types of information would owners not be willing to provide?
• What types of information about a business would bankers want before extending a loan?
• What common interests are shared by bankers and business owners?