Financial reporting is a process of organizing and presenting financial information, giving stakeholders like managers, investors, lenders or tax authorities a clear view into a business’s finances. Financial reporting also helps companies make informed decisions and creates a sense of transparency, encouraging partners, customers or suppliers to work with them.
A financial report summarizes a company’s key performance metrics to help identify opportunities for improvement or growth. It can include the company’s income statement, balance sheet and cash flow statement. These reports can be used by different parties for a variety of purposes, so it’s important to tailor each one to the needs of your primary audience.
An income statement details a business’s revenues and expenses over a specific period. This can be a month, quarter or year. Stakeholders use this report to understand a business’s profitability and spot areas for improvement, like reducing utility costs or improving sales forecasting.
The balance sheet shows a company’s assets, liabilities and shareholders’ equity to offer a full picture of its financial health. Investors review this report to assess a company’s viability and creditworthiness, while lenders analyze it to ensure they have enough assets to cover debt payments.
The cash flow statement highlights how a business generates and uses cash, including operating activities (sales, service revenue), investing activities (depreciation, stock issuance or purchases) and financing activities (debt issuance and repayment). This can be a monthly, quarterly or yearly report. This report helps businesses allocate resources, set SMART goals and compare budgeted vs actual statements to guide investments, financing and operations.