adminA financial report is a set of documents that document your company’s income and expenses over a specific period of time, such as a month, quarter or year. Financial reports are important to your business because they provide a wealth of information for financial analysis, including financial ratios and trending revenue and expense data. Additionally, financial reporting is an integral part of maintaining a high level of transparency in your business’s operations.
The primary purpose of financial reporting is to provide stakeholders with a clear and consistent picture of your company’s financial health and performance. Stakeholders can include investors, partners, suppliers and customers. Stakeholders need up-to-date and accurate financial information to evaluate past, present, or future events. Whether it’s timely revenue data for investors or current debt levels for creditors assessing credit risk, quality financial reporting provides a foundation of transparency that supports informed decision-making and long-term success.
The main documents used in financial reporting are the balance sheet, profit and loss statement and cash flow statement. The balance sheet is a snapshot of your company’s financial position at a specific point in time, listing all assets, liabilities and stockholders’ equity. The balance sheet also includes a special relationship between your company’s total assets and its total liabilities and stockholders’ equity, allowing you to see at a glance how healthy your company is financially.
The profit and loss (P&L) statement, or income statement, is a monthly, quarterly or yearly document showing how much money your company has made by subtracting your company’s expenses from its revenue. The P&L also details your company’s sources of revenue and expense payments, which can help identify opportunities to cut costs and maximize profitability.
