A financial report is a detailed review of a company’s financial data over a period—usually a month, quarter, or year. It’s a critical tool for finance teams, business decision-makers, and investors to make informed decisions about a company’s operations, growth, and future profitability.
The financial statements most commonly used by companies are the balance sheet and income statement. The balance sheet is a snapshot of the company’s assets, liabilities, and shareholder equity at a point in time. It includes current assets (e.g., cash and accounts receivable) and non-current assets (e.g., plant and equipment).
The income statement calculates revenues and expenses using accrual accounting over a reporting period, regardless of when cash is received or paid. It displays gross profit and operating income, which are then subtracted from cost of goods sold and operating expenses to produce a net income.
Finally, the cash flow statement analyzes the company’s inflows and outflows of cash. It shows cash from operating activities (e.g., cash from customers and suppliers) minus capital expenditures (e.g., new equipment and facilities) plus debt issuance or repayment and stock repurchases.
The key to a successful financial report is accuracy. Proper accounting procedures and software ensure that the numbers are correct, while adherence to regulatory standards is also crucial. In addition, financial reports should be clear and understandable so that all stakeholders can act on the information. This can transform financial reporting from a tedious administrative task into a collaborative team sport, where the finance function partners with the rest of the organization to drive success.