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You evaluate loan requests as part of your job at Eastwood National Bank. One loan request you received is from Surfer Dude Supplies, a small company. Richard Tracy, the CEO, is requesting $105,000 and brings you a trial balance (or statement of accounts) for his first year of operations ended December 31.
While you are willing to work with Richard, how would you explain to him that a complete set of financial statements from his accountant would be more useful for evaluating the loan request?
Operating Income
Earnings from a company's main business activities, excluding expenses such as interest and taxes.
Variances
The difference between planned or expected results and actual results in financial performance.
Income Statement
A financial statement that reports a company's financial performance over a specific accounting period, detailing revenues, expenses, and profit or loss.
Standard Direct Materials
The predetermined cost and quantity of direct materials that are expected to be used in the production of a product.
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