Definition
A financial report is a collection of financial statements and accompanying notes that show the business performance, financial position, and cash flows of a company over a given period, typically a fiscal quarter or year. The key components of a financial report include:
Key Components:
- Balance Sheet: Displays the company’s assets, liabilities, and shareholders’ equity at a specific point in time.
- Income Statement: Shows the company’s revenues, expenses, and profits over a period.
- Cash Flow Statement: Details the cash inflows and outflows from operating, investing, and financing activities.
- Statement of Changes in Shareholders’ Equity: Illustrates the changes in the equity section of the balance sheet over a reporting period.
Examples:
Example 1:
A corporation publishes its annual financial report that includes the balance sheet, income statement, cash flow statement, and notes to the financial statements to provide a comprehensive overview of the financial health of the company to stakeholders.
Example 2:
A quarterly financial report provides interim financial information, allowing investors and analysts to see how the company is performing on a more frequent basis and to reflect on trends before the annual report is released.
Example 3:
Non-profit organizations also release financial reports, which includes financial statements tailored to show the organization’s accountability and track how efficiently it is utilizing funds.
Frequently Asked Questions
Q1: What is the primary purpose of a financial report?
A1: The primary purpose of a financial report is to provide useful financial information to stakeholders such as investors, creditors, and management to aid in decision-making.
Q2: Are financial reports only for large public companies?
A2: No, financial reports are essential for businesses of all sizes and types, including small businesses, nonprofits, and government agencies.
Q3: How often are financial reports produced?
A3: Financial reports are typically produced annually and quarterly. However, some companies may choose or are required to provide them more frequently.
Q4: Who prepares financial reports?
A4: Financial reports are prepared by the company’s accounting and finance departments, often with the assistance of external auditors.
Q5: What standards govern the preparation of financial reports?
A5: Financial reports are prepared in accordance with Generally Accepted Accounting Principles (GAAP) in the United States or International Financial Reporting Standards (IFRS) in many other countries.
Related Terms
Annual Accounts: Annual financial statements that give a detailed account of the financial status and performance of a company over the fiscal year.
Balance Sheet: A financial statement that provides a snapshot of a company’s assets, liabilities, and shareholders’ equity at a specific point in time.
Income Statement: A financial document that reports a company’s financial performance over a specific accounting period, detailing revenues and expenses and resulting in net income or loss.
Cash Flow Statement: A financial report that provides aggregate data regarding all cash inflows and outflows a company receives.
Shareholders’ Equity: The residual interest in the assets of the entity after deducting liabilities; represents ownership interest held by shareholders.
Online References
- Securities and Exchange Commission (SEC) - Company Filings
- Financial Accounting Standards Board (FASB)
- International Financial Reporting Standards (IFRS)
- American Institute of CPAs (AICPA)
- Investopedia - Financial Statements
Suggested Books for Further Studies
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“Financial Reporting and Analysis” by Charles H. Gibson
This book provides an in-depth look at financial reporting and its analysis, addressing the accounting procedures and the analysis techniques used to interpret financial reports. -
“Financial Statements: A Step-by-Step Guide to Understanding and Creating Financial Reports” by Thomas Ittelson
This book serves as a comprehensive guide for individuals who need to understand financial statements and the information they contain. -
“Intermediate Accounting” by Kieso, Weygandt, and Warfield
Known for a rigorous coverage of the accounting foundations and up-to-date information on financial reporting standards. -
“Accounting Made Simple: A Step-by-Step Guide to Financial Statements” by Mike Piper
A beginner-friendly guide that breaks down the basics of financial accounting and financial statement preparation. -
“The Interpretation of Financial Statements” by Benjamin Graham and Spencer B. Meredith
An enduring classic that helps readers understand financial statements by explaining the structure and significance of each component.
Accounting Basics: “Financial Report” Fundamentals Quiz
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