Colleen Fernandez, president of Rhino Enterprises, applied for a $175,000 loan from First Federal Bank. The bank requested financial statements from Rhine Enterprises as a basis for granting the loan. Colleen 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?

2. What types of information would business owners be willing to provide bankers? Why types of information would business owners not be willing to provide?

3. What types of information would bankers want before extending a loan?

4. What common interests are shared by bankers and business owners?

Source: Financial & Managerial Accounting, 13e, by Warren/Reeve/Duchac. 2016.