Financial reports are an essential tool for businesses of all sizes. They provide insights into how money is coming in and going out, so that companies can make smart decisions about investing, minimizing risk, and achieving growth potential. Typically, they include summaries of vital financial statements like the income statement, balance sheet and cash flow statement. The income statement calculates the total amount of revenues and expenses (e.g. sales, marketing expenditures and salary costs) over a period, while the balance sheet displays the total value of assets, liabilities and shareholder equity at a point in time. The cash flow statement reveals the net changes in cash inflows and outflows, whether they’re related to operating activities (e.g. cash from customers, payment to suppliers) or financing activities (e.g. debt issuance or repayment, stock repurchases). A financial report also includes a trial balance, which lists the balances of all general ledger accounts at a given point in time.
In addition to financial statements, a thorough report should also include management’s discussion and analysis (MD&A), which provides insight into the company’s accounting policies, contingencies and risk management practices. It should also highlight positive and negative trends, as well as any significant uncertainties that may impact future performance.
Stakeholders depend on accurate and timely financial reporting to evaluate a company’s profitability and growth potential. As such, it’s crucial to adhere to international financial reporting standards and Generally Accepted Accounting Principles (GAAP) to ensure transparency and consistency. In addition, a thorough financial report should always include visuals like charts and graphs to simplify complex data and make it more engaging for readers.