A financial report is a document that provides insight into company finances by summarizing revenue, expenses, profits, capital, and cash flow. These reports are used by business owners, investors, stakeholders, and regulators to assess financial health and performance. Ultimately, these reports are designed to help businesses identify opportunities and manage risk.
Companies need reliable and accurate financial reporting to make informed decisions about the future. Whether they’re looking to expand operations, cut costs, or invest in new projects, financial analysis provides a clear picture of current and historical trends so managers can evaluate options and strategize accordingly.
The most essential financial report is the balance sheet, which offers a snapshot of a company’s financial health at a given point in time by listing assets (e.g., cash, accounts receivable), liabilities (e.g., accounts payable, loans payable), and equity (e.g., common stock, retained earnings) in detail. The balance sheet also classifies these assets and liabilities as either current (expected to be converted to cash or paid within one year) or noncurrent (beyond one year).
Another key financial report is the income statement, which outlines revenues, expenses, and profits over a specific period. The statement of changes in equity reflects contributions from owners, withdrawals by owners, and the issuance or buyback of shares.
Developing accurate and useful financial reports requires an immense amount of effort and resources. Meeting rigid external deadlines and creating meaningful analysis on top of operational reporting can strain many organizations. Using financial reporting tools that integrate data from operational and accounting systems and offer templated reporting can ease the process, freeing up resources to more effectively leverage internal data.
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