Bank of America Financial Statements - Research Paper Example

?Bank of America Financial ments Affiliation with more information about affiliation, research grants, conflict of interest and how to contact Table of Contents Introduction …………………………………………………. 3 Report ……………………………………………………….. 4 Conclusion …………………………………………………. 13 Bank of America Financial Statements Introduction The objective of this paper is to analyze the financial statements of a publicly traded company. The firm chosen here for analysis is Bank of America .The 2011 annual general meeting of shareholders held at the auditorium of office in Bank of America center, Charlotte, North Carolina is the basis of the financial analysis. Bank of America has its headquarters in Charlotte, North Carolina. According to the annual repot 2010 the bank operates in all 50 states of America, in the District of Columbia and also exists in more than 40 countries. Bank of America is a member of the Dow Jones industrial index. The retail banking section of the bank covers around 80% of the US population and has around 57 million customers. The year 2010, according to the annual report, reported a net loss of $ 2235 millions, while in 2009 the bank reported a profit of $ 6276 millions. The per-share data of the firm reports a negative marking in the last two financial years 2009 and 2010. Similarly the market price of the stock has decreased in comparison to the previous year and the present market price is $ 13.34. Report: PricewaterhouseCoopers LLP is the auditor of the Bank of America. PricewaterhouseCoopers LLP (PwC) is the firm’s registered public accounting firm and they conduct the audit of the business. The auditors (PwC) are recognized worldwide and are very popular in the auditing department. These auditors provide a clean opinion on the financial statements as they are in done with the accordance of the law of the state and they value the client’s long standing relationship. PwC values their clients and they share a long and committed relation with their clients. The financial statements of Bank of America provide materialistic and factual evidence of subsequent events. The bank also provides a consolidated five year summary of the selected financial data in order to provide accurate results. The bank is divided into six business segments, which consists of deposits, global card services, home loans & insurance, global commercial banking, GBAM and GWIM. “Results of our operations through six business segments: Deposits, Global Card Services, Home Loans & Insurance, Global Commercial Banking, GBAM and GWIM, with the remaining operations recorded in all Other” (Bank of America, 2010). The auditors provide a clear report of the firm and they dedicate their report to the society. The reason for the bank’s downfall which has reduced its profits in the year 2010 was a decrease in the growth of assets. Similarly the bank has raised large amounts of debt in the last financial year and aims to improve its financial and capital strength. Bank of America is the one of the earth’s major financial organizations, serving individual customers, small- and middle-marketplace business and big businesses with a complete variety of asset management, investing, banking and other fiscal and risk management goods and services. The business offers unmatched expediency in the US, serving around 57 million customer and small business relations with around 5,900 retail banking offices and about 18,000 ATMs and award-winning online banking by way of 29 million active consumers. Bank of America is one amongst the world's foremost wealth management businesses and is a worldwide leader in business and trading and investment banking across a wide variety of asset classes, serving businesses, governments, organizations and persons around the world. “Bank of America does not undertake an obligation, and disclaims any duty, to update any of the information in those documents. Bank of America's future financial performance is subject to various risks and uncertainties that could cause actual results to differ materially from expectations. The factors that could affect the company's future financial results are discussed more fully in our reports filed with the SEC” (Bank of America Corp at Goldman Sachs US Financial Services Conference, 2011). Financial statement shows the assets and liability of the Bank of America. In the year of 2011 financial data are published in three quarter till September 30. End period of these three quarters are, 2011 Q1 is 3/31/2011, 2011 Q2 is 06/30/2011 and 2011 Q3 is 09/30/2011. Total Assets of these three quarters are, 2,219,628.0; 2,261,319.0 and 2,274,532.0 respectively. Total Liabilities of these three quarters are 1,989,376.0; 2,039,143.0 and 2,043,656.0 respectively. Balance sheet showing the total asset and liability of Bank of America in the year of 2010 and 2011 are as follows. That includes last two quarters of the 2010 and first three quarters of the 2011. Assets 2011 Q3  2011 Q2  2011 Q1  2010 Q4  2010 Q3  Cash & Due From Banks 82,865.0 119,527.0 97,542.0 108,427.0 131,116.0 Other Earning Assets, Total 897,580.0 870,153.0 887,637.0 876,832.0 939,281.0 Net Loans 897,449.0 903,945.0 892,582.0 898,555.0 890,329.0 Property/Plant/Equipment, Total - Net 13,552.0 13,793.0 14,151.0 14,306.0 14,320.0 Goodwill, Net 70,832.0 71,074.0 73,869.0 73,861.0 75,602.0 Intangibles, Net 16,801.0 21,818.0 25,120.0 25,100.0 22,942.0 Long Term Investments 0.0 0.0 0.0 0.0 0.0 Other Long Term Assets, Total 0.0 0.0 0.0 0.0 0.0 Other Assets, Total 240,549.0 261,009.0 283,631.0 267,828.0 266,070.0 Total Assets 2,219,628.0 2,261,319.0 2,274,532.0 2,264,909.0 2,339,660.0             Liabilities and Shareholders' Equity           Accounts Payable 0.0 0.0 0.0 0.0 0.0 Payable/Accrued 0.0 0.0 0.0 0.0 0.0 Accrued Expenses 139,743.0 154,520.0 128,221.0 144,580.0 139,896.0 Total Deposits 1,041,353.0 1,038,408.0 1,020,175.0 1,010,430.0 977,322.0 Other Bearing Liabilities, Total 0.0 0.0 0.0 0.0 0.0 Total Short Term Borrowings 281,985.0 290,153.0 318,845.0 305,321.0 361,423.0 Current Port. of LT Debt/Capital Leases 0.0 0.0 0.0 0.0 0.0 Other Current Liabilities, Total 0.0 0.0 0.0 0.0 0.0 Total Long Term Debt 458,269.0 481,073.0 487,937.0 504,345.0 540,514.0 Long Term Debt 458,269.0 481,073.0 487,937.0 504,345.0 540,514.0 Deferred Income Tax 0.0 0.0 0.0 0.0 0.0 Minority Interest 0.0 0.0 0.0 0.0 0.0 Other Liabilities, Total 68,026.0 74,989.0 88,478.0 71,985.0 90,010.0 Total Liabilities 1,989,376.0 2,039,143.0 2,043,656.0 2,036,661.0 (Bank of America Corp, 2011). 4. What are the company’s three largest assets for the most recent year presented? Assets are the probable future financial advantage of the company. That are mainly obtained or managed by an entity. And also it is the outcome of past transactions or proceedings of the company. Three largest assets for the most recent year presented for the Bank of America are: Cash & Due from Banks, Other Earning Assets and Net Loans. 5. What are the company’s three largest liabilities for the most recent year presented? Probable future sacrifice of financial advantages is termed as liabilities. It is mainly arrived from the arising present duties of an entity. And also it is the outcome of past transactions or proceedings of the company. Three largest liabilities for the most recent year presented for the Bank of America are: Total Deposits, Total Short Term Borrowings and Total Long Term Debt 6. What types of stock does the company have? How many shares are there outstanding for each type of stock for the most recent year presented? Bank of America’s common stock is planned on the Pacific Stock Exchange and New York Stock Exchange in symbol BAC. The bank’s “common stock is also listed on the London Stock Exchange, and certain shares are listed on the Tokyo Stock Exchange. The stock is classically listed as BankAmerica in newspapers” (Services for Shareholders, n.d.). The banks of America’s stocks included Redeemable Preferred Stock, Preferred Stock and common stock. Following are the table of stocks of Bank of America. 2011Q3 2011Q2 2011Q1 2010 Q4 2010Q3 Redeemable Preferred Stock 0.0 0.0 0.0 0.0 0.0 Preferred Stock 19,480.0 16,562.0 16, 562.0 16, 562.0 18,104.0 Common Stock 153,801.0 151,567.0 151, 379.0 150, 905.0 149, 563.0 (Bank of America Corp, 2011). Outstanding share of common stock in bank of America is Market Cap that is 57,166,306,800 and Shares Outstanding is 10,135,870,000. 7. Does the company use the single-step or multiple-step income statement or a variation? The bank of America used multiple-step income statement. A Multiple step financial statement divides interest income and interest expenses. There are mainly three advantages to using a multiple-step income statement rather than a single-step income statement: “1. The multiple-step income statement clearly states the gross profit amount. Many readers of financial statements monitor a company's gross margin (gross profit as a percentage of net sales). Readers may compare a company's gross margin to its past gross margins and to the gross margins of the industry” (Income Statement, 2004). 2. It presents the total operating income, which point out the income earned from the bank’s primary activities of selling and buying goods. 3. The base lines of multiple-step income statement information are the net quantity for all the items on the income statement. 8. Does the income statement contain any separately reported items in any year presented, included discontinued operations or extraordinary items? If it does, describe the even that caused the item. Hint: there should be a related footnote. There is no such kind of items in the income statement. 9. Describe the trend in net income over the years presented. Bank of America Corporation in recent times declared first-quarter 2010 net income of $3.2 billion, which was evaluated with a net loss of $194 million in the fourth quarter and net income of $4.2 billion a year earlier. After favored payment, the company received $0.28 per reduced share in the first quarter, up from a failure of $0.60 per share in the fourth quarter and payment of $0.44 per share in the first quarter of 2009. Two features mainly drove consequences in the first quarter: Condition for credit sufferers drop by $3.6 billion from the year-ago period, reflecting a development in credit class. Strong capital markets action, as well as evidence sales and trading driven by industry-leading company and investment banking position, assist drive consequences for Global Banking and Markets. “By each day of the year the 2010 tale emerge to be one of ongoing credit recovery, and our consequences reflect a steadily improving economy,” according to the Chief Executive Officer of the firm. According to the CEO, the customers, folks, company, and institutional investors are progressively more the worth of our incorporated capability. We also are considering sufficient indication that those incorporated capability seize guarantee for long-term shareholder worth. 10. Does the company have other comprehensive income? If yes, what is the nature of the transaction(s)? There are many alterations in the Bank of America Code of Ethics, including the code of ethics suitable to our main executive officer, principal financial officer and main secretarial officer under SEC rules, to include, among other things, fresh features, illustrations and examples to assist in applying the ideas in the Code to daily circumstances. The Code also contains new information this year related to corporate social responsibility (CSR) of the bank, unfairness and aggravation, variety, responding to the media etc. Bank of America’s business is dedicated to the maximum principles of principled and professional accomplish. The Bank of America Code of Ethics (the “Code of Ethics” or the “Code”) offer basic strategy of business practice, and professional and personal conduct, that we are predictable to assume and uphold as Bank of America connections. The public judges Bank of America by our events as associates. This Code is planned to direct by our conduct to inspire public trust and assurance as we reveal our obligation to our Core Values. 11. Does the company use the indirect or direct method of the cash? The indirect method is favored by the majority firms because it shows an understanding from report net income to currency provided by operations. Cash and cash corresponding comprise cash on hand and demand deposits, jointly with short-term, extremely liquid investments that are eagerly exchangeable to an identified total of cash, and that are subject to an irrelevant risk of changes in value. Direction notes point out that an asset usually meet the explanation of cash corresponding, when it has a maturity of three months or less than the date of acquirement. “Basically, the direct method of accounting tracks cash changes from the bottom up to arrive at net income, rather than starting with net income and making adjustments. The astronomical number of changes that would be required if FASB mandates the direct method would make the move a lot like requiring U.S. companies to use international accounting standards, noted Whaley, adding that the systems changes would have to be in place before the rule could be implemented” (Leone, 2009). 12) What is the trend in cash from operations for the year presented? The bank of America is emerged as a leading financial service company with 300000 employees in US and other 40 countries. The company provides financial services to public people, industrial investors and businesses of all sizes group. The company offers many financial services for the companies of all sizes in terms of transact, access to debt and equity market, cash management and save from the risk of interest and currency rate fluctuations. The third customer, the institutional investors get opportunity to invest confidently and wisely so that they get transaction and connection with global market. The companies operating asset and liabilities are the support for the global market and other lending activities. To operate liquidity needs they found fund from cash balance and generating fund through short and long term debt. During the period of 2010 company’s cash and cash equivalent is decreased by $ 12.9 million because of repayment and maturities of long term deposit. The net purchases of AFS security is offset by deposit growth. In 2009 cash and cash equivalent is increased up to $ 88.5 billion, which reflects the company’s liquidity strength. In 2010 net cash of $ 82.6 billion is provided by operating activity, whereas in 2009 it was $ 129.7 billion. During the period of 2010 company used net cash of $30.3 billion for investing activities that primarily for net purchase of AFS debt security. $157.9 billion in 2009 used for this purpose. “During 2010, the net cash used in financing activities of $65.4 billion primarily reflected the net decreases in long-term debt as maturities outpaced new issuances. During 2009, net cash used in financing activities was $199.6 billion reflecting the declines in commercial paper and other short term borrowings due, in part to lower Federal Home Loan Bank (FHLB) balances as a result of our strong liquidity position and a decrease in long term debt as maturities outpaced new issuances” (Bank of America, 2010). 13) What are the 2 largest items included in cash from investing activities? The bank of America is running with many financial services. “Through our banking and various non-banking subsidiaries throughout the United States and in selected international markets, we provide a diversified range of banking and nonbanking financial services and products through six business segments: Deposits, Global Card Services, Home Loans & Insurance, Global Commercial Banking, Global Banking & Markets and Global Wealth & Investment Management. Bank of America is a member of the Dow Jones Industrial Average” (Bank of America Corporation, n.d.). The major part of revenues comes from the deposits, global card services and home loan insurances. Around 44% of revenue earn by this segment. That may reach revenue of $ 49.4 billion. This investment mainly comes from the public people. Companies and institutional investors are contributing 35% of revenue that is the second largest cash contributor for the company. This is up to $ 39.4 billion of revenue. Conclusion: Bank of America has always maintained profits throughout the years, but in the year 2010 the profits of the bank has decreased and this has affected the bank negatively. The bank’s performance has been negative in the year 2010 and this is because of the firm’s decrease in total assets. The year 2011 has seen an increase in the profits and this has improved the business of the Bank of America. Bank of America has increased their financial goals and has reported a net increase in its assets in the year 2011. Therefore, to conclude, even though Bank of America’s financial performance in the years 2009 and 2010 was negative yet the bank shows positive profits in the year 2011 till date. Reference List Bank of America Corporation, (n.d.). Seeking Alpha. Retrieved December 04, 2011, from http://seekingalpha.com/symbol/bac/description Bank of America Corp at Goldman Sachs US Financial Services Conference, (2011). Bank of America. Retrieved December 04, 2011, from http://investor.bankofamerica.com/phoenix.zhtml?c=71595&p=irol-irhome Bank of America Corp, (2011). Microsoft. Retrieved December 04, 2011, from http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?lstStatement=Balance&symbol=US%3aBAC&stmtView=Qtr Bank of America, (2010). 2010 Annual Report. Retrieved December 04, 2011, from http://media.corporate-ir.net/media_files/irol/71/71595/reports/2010_AR.pdf Income Statement, (2004). Accounting Coach. Retrieved December 04, 2011, from http://www.accountingcoach.com/online-accounting-course/04Xpg04.html Leone, M. (2009). CFO Blog: Commentary and Opinion. CFO. Retrieved December 04, 2011, from http://www.cfo.com/blogs/index.cfm/l_detail/14456437 Services for Shareholders, (n.d.). Bank of America. Retrieved December 04, 2011, from http://phx.corporate-ir.net/phoenix.zhtml?c=71595&p=irol-contact_pf Read More