A financial report is a detailed snapshot of your business’s finances over a specific period, like a quarter or year. It’s typically required for public companies, and can be a key piece of information for investors, lenders, and other stakeholders who need to make an informed decision about investing in your company or lending you money.
The most important sections of a financial report include the income statement, cash flow statement, and balance sheet. The income statement summarizes total sales revenue and subtracts non-operating expenses to get net profit, which can help stakeholders understand your profitability and performance. The cash flow statement summarizes cash inflows and outflows, which helps stakeholders assess your ability to meet short-term obligations. The balance sheet lists your assets (like cash and cash equivalents, inventory, marketable securities, accounts receivable), liabilities (like accounts payable, debt, and accrued expenses), and equity (shareholders’ equity) at a given point in time. The balance sheet also classifies each asset as current (expected to be converted to cash or paid within one year) or noncurrent.
A financial report should always be carefully reviewed to ensure accuracy. A mistake in a single formula can throw off your entire report, so it’s best to have someone else read it before submitting. Also, using a professional reporting tool can simplify the process by automating data collection and organization, reducing errors and saving time.