A financial report is a periodic evaluation of a company’s income, cash flow, resources and how they are used, and other business activities. It helps finance teams, business decision-makers, and investors gather the data they need to assess the strength of a business, determine its trajectory, and decide how best to allocate funding or resources.
The main purpose of financial reporting is to provide transparency and accountability to internal and external stakeholders. This enables stakeholders to make better decisions about providing capital, working with the business, or taking action against it. Financial reports are also crucial for regulatory compliance and meeting statutory obligations.
A comprehensive financial report includes several key sections:
Income Statement: This reports revenue, expenses, and net income/loss for a fiscal period. It also compares performance to the previous period. Balance Sheet: This shows assets, liabilities, and equity at a specific point in time. It is used to gauge a company’s net worth, and is usually presented in comparison to the previous period. Notes to Financial Statements: This provides additional context and detail to the statements, including accounting policies, contingencies, and other relevant information that may not be apparent from the core statements. Management’s Discussion and Analysis (MD&A): This section describes management’s perspective on the financial statements and other important details, including market trends and potential risks.
Many large, publicly-traded companies voluntarily release their financial information to the public on a regular basis. This demonstrates their commitment to transparency and accountability, as well as their desire to build trust with investors and the wider community.
