A financial report is a detailed snapshot of a company’s finances over a specified period, reflecting profits and losses. It provides investors, managers, and regulators with a deeper understanding of how efficiently a business is operating—and its possible trajectory. Financial reports include a balance sheet, an income statement, and a cash flow statement. They are often required by law or industry regulations for publicly-held corporations to file annually, semiannually, quarterly or monthly.
Besides meeting regulatory requirements, businesses also rely on financial reports for budgeting and conducting financial forecasts. This helps them identify trends, opportunities and potential risks that they may face in the future. The report also enables them to evaluate past performance, spot areas for improvement and align resources to achieve strategic goals.
The most common financial reports are the balance sheets, the income statements and the cash flow statements. The balance sheet shows a company’s assets, liabilities and stockholders’ equity as of a given date. It’s a key indicator of a company’s health, especially when compared to similar businesses in the industry. The income statement reflects revenue, expenses and net income or loss over a specific fiscal period. It’s important to note that the income statement should be compared with previous period’s results to see a clear trend of growth or decline.
The cash flow statement outlines sources and uses of cash for the period, including investment in fixed assets, repayment of debts, payment of expenses, and other activities. It’s also compared with previous period’s results to show a trend of liquidity.
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