A financial report is an official document that showcases all the financial activities and performances of your company over a period of time. It organizes all the data into a format that can be analyzed for potential business growth, debt management, and more. They are legally required and provide transparency and accountability in the finance world.
The main purpose of a financial report is to show the health of your company at a certain point in time, but it also serves many other purposes. For example, analyzing financial reports can help you make strategic decisions, connect with your team and the company, and identify opportunities for growth.
However, a major drawback of financial reporting is that it focuses on the past and may not accurately predict future performance. In addition, there is a risk of financial manipulation, in which information is misrepresented or reported incorrectly to influence decisions or create a false impression. Therefore, it is essential that your financial reports are timely and accurate. The most effective and accurate financial reports combine elements from the balance sheet, income statement, cash flow statement, and management’s discussion and analysis (MD&A). The balance sheet is a snapshot of your company’s assets, liabilities, and shareholder equity at a specific point in time. It lists your assets, such as cash and cash equivalents, marketable securities, inventory, and equipment value, along with your liabilities, such as accounts payable, loans payable, and accrued expenses. This is a clear illustration of your company’s financial standing at that moment, including any retained earnings.
About the Author
