Ed Eisler wants to open a caf in Digby; Nova Scotia. In need of cash, he asks

Ed Eisler wants to open a café in Digby; Nova Scotia. In need of cash, he asks a bank for a loan. The bank requests financial statements showing the likely results of operations for the year and the expected financial position at year-end. With little knowledge of accounting, Ed doesn't understand the request.

{Requirements}

1. Explain to Ed the information provided by the income statement and the balance sheet.

2. Explain to Ed how items on the income statement are relevant to making a lending decision.

3. Explain to Ed how items on the balance sheet are relevant to making a lending decision.

4. Given how the bank will use the income statement and balance sheet to make a lending decision, how might Ed be biased to present key items on each of these statements? Would it be ethical for Ed to do this and why?