A financial report provides a detailed snapshot of your business’s finances over a period, like a quarter or year. It combines important data from your balance sheet, income statement and cash flow statements to help you analyze your company’s performance, profitability and potential trajectory.
Your financial reports should adhere to accounting and reporting standards (like the International Financial Reporting Standards and Generally Accepted Accounting Principles). This ensures that your data is consistent, comparable and transparent across businesses.
Financial analysis helps you set SMART goals and make smart decisions that will help your company grow. A well-written financial report can communicate these objectives to your stakeholders and ensure that everyone has the same understanding of your financial data.
An income statement shows your company’s revenues, expenses and profits over a reporting period. It uses accrual accounting to match revenue and costs, regardless of when cash is received or paid. It also breaks down non-operating and operating expenses to highlight what’s driving your financial results.
A cash flow statement summarizes the company’s cash inflows and outflows from operating, investing and financing activities over a period. This includes cash from customers, suppliers and employees, as well as the sale or purchase of assets. It can be presented using either the direct or indirect method. The direct method starts with net income reported on the income statement and adds or subtracts non-cash expenses and changes in balance sheet accounts (like accounts receivable, accounts payable and inventory).
A shareholders’ equity report shows the total amount of ownership invested in your company by its owners. This value can increase or decrease through retained earnings, dividend distributions and stock issuance or repayment.
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