Objectives of Financial Reporting

The needs of users and the general business environment are the basis for the Financial Accounting Standards Board
(FASB's) three objectives of financial reporting:

1. To furnish information useful in making investment and credit decisions.

2. To provide information useful in assessing cash flow prospects.

3. To provide information about business resources, claims to those resources, and changes in them

Qualitative Characteristics of Accounting Information

FINANCIAL STATEMENTS

QUALITATIVE CHARACTERISTICE

 UNDERSTANDABILITY

Decision makers must be able to interpret accounting information

 USEFULNESS

Accountants must provide information that is useful in making decisions.

RELEVANCE

 Feedback value
 predictable value
 Timeliness

RELIABILITY

 Faithful representation
 verifiability
 Neutrality

CONVENTIONB THAT HELPS IN INTERPRETATION

 Comparability and consistency

 Materiality
 Conservatism
 Full disclosure
 Cost-benefit

Qualitative Characteristics of Accounting Information

Qualitative characteristics of accounting information are standards for judging that information.

The two qualitative characteristics are understandability and usefulness.

Understandability

 The accountant prepares financial statements according to accepted practices that are believed to be
understandable.
 Decision makers must interpret accounting information and use it in making decisions.
Usefulness

• To be useful, accounting information must be relevant and reliable.

• Relevance means the information can affect the outcome of a decision.

 ✓ Provide feedback.
 ✓ Help predict future conditions.
 ✓ Be timely.

Reliability means the user must be able to depend on the information.

 ✓ Must represent what it is meant to represent.

 ✓ Must be credible.
 ✓ Must be verifiable by independent parties using the same methods of measuring.
 ✓ Must be neutral.

What are the qualitative characteristics of accounting information, and why are they important?

Qualitative characteristics are standards for judging the information that accountants give to decision makers.
Accountants try to provide information that is understandable and useful. Understandable means that the user is able to
interpret the information. Usefulness depends on the characteristics of relevance and reliability. Relevance requires that
the information give feedback, help make predictions, and be timely. Reliability requires that the information represent
what it is supposed to represent, and be credible, verifiable, and neutral.

Conventions That Help in the Interpretation of Financial Information

Comparability

 Information is presented in such a way that a decision maker can recognize similarities, differences, and trends
over different time periods or between different companies.
 Accounting information about a company is more useful if it can be compared with similar facts about the same
company over several time periods or about another company for the same time period.

Consistency

 An accounting procedure, once adopted by a company, remains in use from one period to the next unless users
are informed of the change.
 GAAP requires that the change and its dollar effect be described in the notes to the financial statements.

Materiality refers to the relative importance of an item or event.

 An item is material if users would have done something differently if they had not known about the item.
 Materiality is normally determined by relating its dollar value to an element of the financial statements, such as
net income or total assets.
 Some accountants follow the 5% or more of net income rule to judge materiality.

Conservatism

 When accountants face major uncertainties about which accounting procedure to use, they generally choose the
one that is least likely to overstate assets and income.
 Abuse of the conservatism principle may lead to financial statements that are misleading.

Full Disclosure
  Full disclosure requires that financial statements and their notes present all information that is relevant to the
users' understanding of the statements.
 Beyond required disclosures, application of full disclosure is based on the judgment of management and the
accountants who prepare the financial statements.
 The demands for full disclosure have increased in recent years.

Cost-Benefit

 Benefits to be gained from providing accounting information should be greater than the costs of providing it.
 Beyond providing minimum levels of relevance and reliability, cost-benefit is based on professional judgment.

Management's Responsibility for Ethical Reporting

Fraudulent Financial Reporting

 The intentional preparation of misleading financial statements.

 The distortion of records (manipulation of inventory records).
 Falsified transactions (fictitious sales or orders).
 The misapplication of accounting principles (treating as an asset an item that should be expensed).

Possible Motives for Fraudulent Financial Reporting

 To obtain a higher price when a company is sold.

 To meet the expectations of stockholders.
 To obtain a loan.
 For personal gain.

Who is responsible for preparing reliable financial statements, and what is a principal way of fulfilling the
responsibility?

A. Management is responsible for the preparation of reliable financial statements. Management fulfills its
responsibility by maintaining a system of internal controls.

Classified Balance Sheet

Assets

Assets are divided into four categories.

1. Current assets.
2. Investments.
3. Property, plant, and equipment.
4. Intangible assets.

Current Assets

 Cash and other assets that are reasonably expected to be realized in cash, sold, or consumed over the next year
or the normal operating cycle of the business, whichever is longer.
 Cash to cash cycle.
 Listed in order of decreasing liquidity.

Investments

 Investments are assets, usually long term, that are not used in the normal operations of the business and that
management does not plan to convert to cash within the next year.
Property, Plant, and Equipment

 Long-term assets used in the continuing operation of the business.

 Also called fixed, operating, long-lived, or tangible assets.
 Often abbreviated PP&E.

Intangible Assets

 Intangible assets are long-term assets that have no physical substance but have a value based on the rights or
privileges that belong to their owner.

Other Assets

 Other assets are sometimes used for all owned assets other than current assets and PP&E.

Liabilities

Liabilities are divided into two categories.

1. Current liabilities.
2. Long-term liabilities.

Current Liabilities

 Current liabilities are obligations due to be paid or performed within a year or within the normal operating cycle
of the business, whichever is longer.

Long-Term Liabilities

 Long-term liabilities are the debts of a business that fall due more than one year in the future or beyond the
normal operating cycle, or that are paid out of noncurrent assets.

Stockholders' Equity

Stockholders' equity is divided into two categories.

1. Contributed or paid-in capital.

2. Retained earnings.

How would a mortgage that is paid monthly for 120 months be classified?

A. The portion due during the next year or the current operating cycle would be classified as a current liability; the
portion due after next year or the current operating cycle would be classified as a long-term liability.

Multistep Income Statement

 Multistep income statement derives net income in a step-by-step manner; however, it shows only the totals of
major categories.

Multistep income statement: A Merchandising Company

 Net sales
 Cost of goods sold
 Gross margin
 Operating expenses
  Income from operations
 Other revenues and expenses
 Income before income taxes
 Income taxes
 Net income
 Earnings per share

Single-Step Income Statement

 Single-step income statement derives income before income taxes in a single step by putting the major revenue
categories in the first part of the statement and by putting the major cost and expense categories in the second
part of the statement.
 Income taxes shown as a separate item.
 Simple presentation.

Why are other revenues and expenses separated from operating revenues and expenses in the multistep income
statement?

A. Other revenues and expenses are separated from operating revenues and expenses so that income from
operations (the actual business of the company) can be isolated from the financing and nonoperating aspects.

Using Classified Financial Statements

Evaluation of Liquidity: Working Capital

 The amount by which total current assets exceed total current liabilities.

Evaluation of Liquidity: Current Ratio

 The ratio of current assets to current liabilities.

 Compare to last year and industry.

Evaluation of Profitability: Profit Margin

 The percentage of each sales dollar that results in net income.

Evaluation of Profitability: Asset Turnover

 Measure of how efficiently assets are used.

Evaluation of Profitability: Return on Assets

 Measure of how efficiently assets are used.

 Considers assets and income.
 Evaluation of Profitability.
Debt to Equity

 Proportion of company financed by creditors compared to the amount financed by investors.

Evaluation of Profitability: Return on Equity

 Measure of how much shareholders have earned on their investment.

 Which is the more

A. The goals of liquidity and profitability are equally important. Both must be met if a business is to survive.

LESSON 2: REVIEW OF ACCOUNTING

 The Income Statement measures profitability.

 The price-earnings ratio indicates the relative valuation earnings.
 The Balance Sheet shows assets and the financing of those assets.
 The Statement of cash flows indicates the change in the cash position of the firm.
 Depreciation provides the tax reduction benefit.

RETURN TO CAPITAL
Primary Sources of Capital

 Bondholders
 Preferred stockholders
 Common stockholders

PRICE-EARNINGS RATIO APPLIED TO EARNINGS PER SHARE

 Price-earnings ratio – refers to the multiplier applied to earnings per share to determine current value of the
common stock.

Price-earnings Ratio = Market price per share/ Earnings per share

BALANCE SHEET

Indicates what the firm owns and how these assets are financed in the form of liabilities or ownership interest. The
balance sheet delineates the firm’s holdings and obligations.
INTERPRETATION OF BALANCE SHEET ITEMS

Current Assets - covers items that may be converted to cash within one year (or within the normal operating cycle of the
firm).

Marketable Securities - temporary investments of excess cash.

Accounts Receivable include an allowance for bad debts to determine their anticipated collected value.

Inventory may be in the form of raw materials, goods in process or finished goods.

Prepaid expenses represents future expense items that have already been paid (insurance premiums or rent).

Plant and equipment is carries at original cost minus accumulated depreciation.

Investments represent a long-term commitment of funds (at least a year). Includes stocks, bonds, investments in other
corporations.

Short-term obligations are:

• Accounts payable – represent amounts owed on open account to suppliers.

• Notes payable – short-term signed obligations to the banker or other creditors.

Accrued expense generated when a service has been provided or an obligation incurred and payment has not yet taken
place.

Stockholders’ equity represents the total contribution and ownership interest of preferred and common stockholders.

CONCEPT OF NET WORTH

Net worth or book value - stockholders’ equity minus the preferred stock component.

 
STATEMENT OF CASH FLOWS

 Use to emphasize the critical nature of cash flow to the operations of the firm.
 The income statement and balance sheet that we have studied thus far are, normally based on accrual method
of accounting, in which revenues and expenses are recognized as they occur, rather than when cash actually
changes hands.
 When the actual payment is finally received under accrual accounting, no revenue is recognized (it has already
been accounted for previously).

DEVELOPING THE ACTUAL STATEMENT

Primary sections of the statement of cash flows:

 Cash flows from operating activities.

  Cash flows from investing activities.
 Cash flows from financing activities.

Illustration of concepts behind the statement of cash flows.

DETERMINING CASH FLOWS FROM OPERATING ACTIVITIES

♫ Direct method - in which every item on the income statement is adjusted from accrual accounting to cash
accounting.

♫ Indirect method – in which net income represents a starting point and then adjustments are made to convert
net income to cash from operations.

Steps in computing net cash flows from operating activities using the indirect method.

Net Income

+
Depreciation

-
Increase in current assets

+
Decrease in current assets

+
Increase in current liabilities

-
Decrease in current liabilities

equal

Net cash flow fromoperating

activities
  Start with net income.
 Recognize that depreciation is a noncash deduction in computing net income and should be added back to the
net income to increase the cash balance.
 Recognize that increases in the current assets are a use of funds and reduce the cash balance (indirectly) - as an
example, the firm spend more funds on inventory.
 Recognize that decreases in current assets are a source of funds and increase the cash balance (indirectly) – that
is firm reduces funds tied up in inventory.
 Recognize the increases in current liabilities are a source of funds and increase the cash balance (indirectly) – the
firm gets more funds from creditors.
 Recognize the decreases in current liabilities are a use of funds and decrease the cash balance (indirectly) – that
is, the firm pays off creditors.

Balance sheet for the most recent two years

Cash flow from

operating activities

DETERMINING CASH FLOWS FROM INVESTING ACTIVITIES

 - Represent the second section in the statement of cash flows. It relates to the long-term investment activities in
other issuers’ securities or more importantly in plant and equipment.

Decreasing investment – a source of funds. Increasing investments - used of funds.

Cash flows from investing activities

DETERMINING CASH FLOWS FROM FINANCING ACTIVITIES

Cash flows from financing activities – shows the effect of financial activities on the corporation. Financing activities
applies to the sales or retirement of bonds, common stock, preferred stock, and other corporate securities.

 Sales of the firm’s securities - a source of funds.

 Retirement or repurchase of such securities and payments of dividends – a use of funds

Cash flow from financing activities

COMBINING THE THREE SECTIONS OF THE STATEMENT

DEPRECIATION AND FUNDS FLOW

 Depreciation – represents an attempt to allocate the initial cost of an asset over its useful life. In essence, we
attempt to match the annual expense of plant and equipment ownership against the revenues being produced.
Nevertheless, the charging of depreciation is purely an accounting entry and does not directly involve the
movement of funds. To go from accounting flows to cash flows in the table presented below, we restored the
noncash deduction of $50,000 for depreciation that was subtracted in the table of income statement.

 Let us examine the simple case involving depreciation. Assume we purchase a machine of $500 with five-year
life and we pay for it in cash. Our depreciation schedule calls for equal annual depreciation charges of $100 per
year for five years. Assume further that our firm has $1,000 in earnings before depreciation and taxes, and the
tax obligation is $300. Note the difference between accounting flows and cash flows for the first two years.
FREE CASH FLOW

Free cash flow is equal to:

Cash flow from operating activities

Minus: capital expenditures (required to maintain the productive capacity of the firm)

Minus: Dividends (needed to maintain the necessary payout on common stock and to cover any preferred stock
obligation)

INCOME TAX CONSIDERATIONS

Virtually every financial decision is influenced by federal income tax considerations. Primary examples are the lease
versus purchase decision, the issuance of common stock versus debt decision, and the decision to replace the asset.

COST OF A TAX-DEDUCTIBLE EXPENSE

The business person often states that a tax-deductible item, such as interest on business loans, travel expenditures, or
salaries, costs substantially less than the amount expended, on an after tax basis. We shall investigate how this process
works. Let us examine the tax statements of two corporations-the first pays $100,000 in interest, and the second has no
interest expense. An average tax rate of 40 percent is used for ease of computation.

DEPRECIATION AS A TAX SHIELD

Although depreciation is a new source of funds, it provides the important function of shielding part of our income from
taxes. Let us examine Corporations A and B again, this time with an eye toward depreciation rather than interest.
Corporation A charges off $100,000 in depreciation, while Corporation B charges off none.
ANALYSIS OF FINANCIAL STATEMENTS
Learning Objectives:
 Define financial statement analysis.
 Understand the need to analyze the broader business environment.
 Know the basics of profitability analysis.
 Realize the limitations of financial statements analysis.
 Analyze a business firm’s short-term financial position, asset liquidity and management, long-term financial
position and profitability using financial ratios.
 Apply the DuPoint Disaggregation Analysis.

Definition:
Financial statement analysis is the process of extracting information from financial statements to better
understand a company’s current and future performance and financial condition.
Analyzing the Broader Business Environment
Quality analysis depends on an effective business analysis. The broader business context in which a company
operates must be assessed as its financial statements are read and interpreted. A review of financial statements, which
reflect business activities, cannot be undertaken in vacuum. It is contextual and can only be effectively undertaken within
the framework of a thorough understanding of the broader forces that impact the company performance. Some of which
that needs t
o look into are: Life cycle, Outputs, Buyers, Inputs, Competition, Financing, Labor, Governance, and Risk.
Basics of Profitability Analysis
The primary goal of financial management is to maximize shareholders’ wealth, not accounting measures such as
net income or earnings per share (EPS). However, accounting data influence stock prices and this data can be used to see
why a company is performing the way it is and where it is heading.
Financial Analysis involves
 Comparing the firm’s performance to that of other firms in the same industry, and
 Evaluating trends in the firm’s financial position over time.

Limitations of Financial Statements Analysis

1. Information derived by the analysis are not absolute measures of performance in any and all of the areas of
business operations.
2. Limitations inherent in the accounting data analyst works with.
3. Limitations of the performance measures or tools and techniques used in the analysis.
4. Analysis should be alert to the potential for management to influence the outcome of financial statements in order
to appeal to creditors, investors and others.

Financial Ratio Analysis

Financial ratio is a comparison in fraction, proportion, decimal or percentage of two significant figures taken from
financial statements. It expresses the direct relationship between two or more quantities in the statement of financial
position and statement of comprehensive income of a business firm.
The ratio can be categorized as follows:
1. Liquidity ratios. These ratios give us an idea of the firm’s ability to pay off debts that are maturing within a year
or within the next operating cycle. Satisfactory, liquidity ratios are necessary if the firm is to continue operating.
 2. Asset management ratios. These ratios give us an idea of how efficiently the firm is using its assets. Good asset
management ratios are necessary for the firm to keep its costs low and thus, its net income high.
3. Debt management ratios. These would tell us how the firm has financed its assets as well as the firm’s ability to
repay its long-term debt. Debt management ratios indicate how risky the firm is and how much of its operating
income must be paid to bondholders rather than stockholders.
4. Profitability. These ratios give us an idea of how profitable the firm is operating and utilizing its assets.
Profitability ratios combine the asset and debt management categories and show their effects on return on equity.
5. Market book ratios. These ratios which consider the stock price give us an idea of what investors think about the
firm and its future prospects. Market book ratios tell us what investors think about the company and its prospects.

A summary of the ratios, their formula and significance is presented below:

I. Ratios Used To Evaluate Short-Term Financial Position (Short-Term Solvency and Liquidity)

Name Formula Significance

1. Current ratio Total Current Assets Primary test of solvency to meet
Total Current Liabilities current obligations from current
assets as a going concern;
measure of adequacy of working
capital
2. Acid-test ratio or Total Quick Assets* A more severe test of immediate
Quick ratio Total Current Liabilities solvency; test of ability to meet
demands from current assets.
*Cash + Marketable Securities + Accounts receivable

1. a)Working Capital to Working Capital Indicates relative liquidity of

total assets Total Assets total assets and distribution of
resources employed
b)Working Capital Current Assets less
Current Liabilities
2. Cash Flow Cash + Marketable Securities + Measures short-term liquidity by
Liquidity ratio Cash Flow from Operating considering as cash resources
Activities (numerator) cash plus cash
Current Liabilities equivalents plus cash flow from
operating activities.
3. Defensive Interval Quick Assets Measures length of time in days
Ratio Projected Daily Operational the firm can operate on its
Expenses present liquid resources.

II. Ratios Used To Evaluate Asset Liquidity and Management Efficiency

Name Formula Significance

1. a)Trade receivable Net credit sales* Velocity of collection of trade
turn-over Average Trade Receivable(net) accounts and notes; test of
efficiency of collection.

b)Average Collection 360 days Evaluates the liquidity of

period or number of Receivable Turnover accounts receivable and the
days’ sales uncollected Or firm’s credit policies
Accounts Receivable
Net Sales/360
2. Inventory Turnover
a) Merchandise Cost of goods sold Measures efficiency of the firm
Turnover Average Merchandise Inventory in managing and selling
inventories.
 Cost of goods sold
b) Finished goods Average Finished goods -do-
inventory Inventory

Cost of goods manufactured

Average Goods-in Process Measures efficiency of the firm
c) Inventory in managing selling inventories.
d) Goods in process
turnover Raw Number of times raw materials
Materials Used inventory was used and
Average Raw Materials replenished during the period.
e) Raw materials Inventory
turnover Measures average number of
360 days days to sell or consume the
Inventory Turnover average inventory.
f) Days supply in
Inventory
*or Net Sales if net credit sales is not available

3. Working Capital Net Sales Indicates adequacy and activity

Turnover Ave. Working Capital of working capital.
4. Percent of current Amount of each Indicates relative investment in
asset to total current current asset item each current asset.
assets Total Current Assets
5. Current assets Cost of Sales Measures movement and
Turnover + utilization of current resources to
Operating Expenses + meet operating requirements.
Income Taxes
+
Other Expenses (net)
(excluding depreciation
and amortization)
Ave. Current Assets.
6. Payable turnover Net Purchases Measure efficiency of the
Average Accounts Payable company in meeting trade
payable.
7. Operating cycle Average Conversion Measures the length of time
Period of Inventories required to convert cash to
+ finished goods; then to receivable
Average Collection and then back to cash
Period of Receivable
+
Days cash
8. Days cash Ave. Cash Balance Measures availability of cash to
Cash operating costs meet average daily cash
÷ 360 days requirement.
9. Free cash flow Net cash from Excess of operating cash flow
Operating activities – over basic needs.
Cash used for investing activities
and Dividends
10. Investments or Net Sales Measures efficiency of the firm
Assets turnover Ave. Total Investment in managing all assets.
Or
Total Assets
11. Sales to fixed assets Net Sales Tests roughly the efficiency of
(plant assets turnover) Ave. Fixed Assets(net) management in keeping pant
 properties employed.
12. Capital intensity ratio Total Assets Measures efficiency of the firm
Net Sales to generate sales through
employment of its resources.

III. Ratios Used To Evaluate Long-Term Financial Position or Stability / Leverage

Name Formula Significance

1. Debt ratio Total Liabilities
Total Assets
2. Equity ration Total Equity
Total Assets
3. Debt to equity ratio Total Liabilities
Total Equity
4. Fixed Assets to long- Fixed Assets(net)
term liabilities Total Long-term Liabilities
5. Fixed Assets to total Fixed Assets (net)
equity Total Equity
6. Fixed Assets to total Fixed Assets (net)
equity Total Assets
7. Book value per share of Ordinary
ordinary shares shareholder’s equity
No. of outstanding shares
8. Times interest earned Net Income before
Interest and Taxes
Annual Interest Charges
9. Times preferred Net Income
Dividend requirement After Taxes
earned Preferred Dividends Requirement
Shows proportion of all assets
that are financed with debt
Indicates proportion of assets
provided by owners. Reflects
financial strength and caution to
creditors.
Measures debt relative to
amounts of resources provided
by owners.
Reflects extent of investment in
long-term assets financed from
long-term debt.
Measures the proportion of
owner’s capital invested in fixed
assets.
Measures investment in long-
term capital assets.
Measures recoverable amount in
the event of liquidation if assets
are realized at their book values.
Measures how many times
interest expense is covered by
operating profit.
Indicates ability to provide
dividends for preference
shareholders.

10. Times fixed charges Net Income before Measures coverage capability
earned Taxes and Fixed Charges more broadly than times interest
Fixed Charges earned by including other fixed
(Rent + Interest + charges.
Sinking Fund payment
Before taxes*)

IV. Ratios Used To Measure Profitability and Returns to Investors

Name Formula Significance

1. Gross profit margin Gross Profit Measures profit generated after
Net Sales consideration of cost of product
sold.
*Sinking fund payment before taxes = Sinking fund payment after taxes/1 – Tax Rate

2. Operating Profit margin Operating Profit Measures profit generated after

Net Sales consideration of operating costs.
3. Net Profit margin Net Profit Measures profit generated after
 (Rate of return on net Net Sales
sales)
4. Cash Flow Margin Cash Flow for
Operating activities
Net Sales
5. Rate of return on Net Profit
assets(ROA) * Ave. Total Assets
Alternative Formula:
Asset Turnover
X
Net Profit Margin
6. Rate of return on Net Income
equity** Ave. Ordinary Equity
7. Earnings per share Net income less preference
dividends requierment
Ave. ordinary shares outstanding
8. Price/earnings ratio Market Value per Share of
Ordinary Shares
Earnings per share of
Ordinary Shares
9. Dividend Payout Dividends per share
Earnings per share
10. Dividend Yield Annual
Dividends per share
Market Value per share
Of Odinary Shares
11. Dividends per share Dividends
Paid/Declared
Ordinary shares
Outstanding
:
*If there is interest-bearing debt, Rate of return on assets is computed as follows:
consideration of all expenses and
revenues.
Measures ability of the firm to
translate sales to cash
Measures overall efficiency of
the firm in managing assets and
generating profits.
Measures rate of return on
resources provided by owners.
Peso return on each ordinary
share. Indicative of ability to pay
dividends.
Measures relationship between
price of ordinary shares in the
open market and profit earned on
a per share basis.
Shows percentage of earnings
paid to shareholders.
Shows the rate earned by
shareholders from dividends
relative to current price of stock.
Shows portion of income
distributed to shareholders on a
per share basis.

Net income + [Interest expense (1 – Tax rate)] /Average Total Assets

(A measure of the productivity of assets regardless of how the assets are financed)
**May also be computed as follows

ROE = Return on Assets x Equity Multiplier

Equity Multiplier = 1
Equity Ratio

12. Rate of return on average Net Income Measures the profitability of

current assets Ave. Current Assets current assets invested.
13. Rate of return per Rate of return on Shows profitability of each
turnover of current assets Ave. Current assets turnover of current assets.
Current Assets
turnover

Illustrative Case 12-1

The financial statements of EBC Enterprises, Inc. will be used to illustrate the use of financial ratios in analyzing the
company’s (1) liquidity, (2) activity or efficiency in managing resources, (3) leverage, and (4) profitability.
 Liquidity ratios are ratios that measure the firm’s ability to meet cash needs as they arise (e.g., payment of
accounts payable, bank loans and operating costs).
Activity ratios are ratios that measure the liquidity of specific assets and efficiency in managing assets such as
accounts receivable, inventory and fixed assets.
Leverage ratios are ratios that m
easure the extent of a firm’s financing, with debt relative to equity and its ability to cover interest and other fixed
charges such as rent and sinking fund payments.
Profitability ratios are ratios that measure the overall performance of the firm and its efficiency managing assets,
liabilities, and equity.
The Statement of Financial Position as of December 31, 2011 and 2010, Income Statements and Statements of Cash
Flows of EBC Enterprises, Inc. for the years 2011, 2010 and 2009 are given below:
EBC Enterprises, Inc.
Statements of Financial Position at December 31, 2011 and 2010
(in thousands)