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Management Discussion and Analysis Pg. 1The Rainbow Paint Company’s management discussion and analysis gives an overview of the company’s financial activities for the year ending the 31stof December 2006. The information provided in this analysis is intended to emphasize the current years’s activity inclusive of currently known facts that should be read in juxtaposition with our Transmittal Letter starting on page 15 as well as the resulting changes and financial statements beginning on page 10. The discussion and analysis is a fundamental portion to the consolidated financial statements. The per share amounts reflected in the common share per amounts assume dilution unless otherwise noted. The changes are currently based on unrounded amounts. Financial Highlights to review are:Working Capital $750,000.00Current Ratio = 2.0Net Sales Ratio = 1.5Net Assets change for the year: increased $3,173,000.00 to $3,843,000.00EPS on Common Stock = 4.10Dividends per share common stock = .90Rate earned on common stockholders’ equity = 15.7%You may review the company’s financial highlights in details beginning on page 7. A frequently asked question usually entails a long the lines of, will the company be better off as a whole or worse with the final years’ activities. Our statement of net assest and the statement of activities both report information about company on a global scale, or as a company as a whole. Both reports detail the information as well as answer the necessary questions. The accrual basis of accounting which is used in most private sector companies is used to include all assets and liabilities. All of the current years’ revenues and expenses are considered heedless of and/or when cash is received and/or paid. The statement of Net Assets and statement of activities report the company’s net assets and changes within those assets. Rainbow’s net assets may be viewed as an indication of the company’s financial health. This can be done by subtracting the assets from liabilities. Any