A financial report is a detailed snapshot of a company’s finances over a period, often a quarter or year. It pulls together key data from the balance sheet, income statement, and cash flow statement to show how money is moving into and out of a business. Financial reports help investors and managers understand a company’s performance and health. They also serve as the basis for making strategic decisions and forecasting future growth. Financial statements are typically mandatory for businesses that want to attract investment and secure credit from banks and lending institutions.
The most basic type of financial report is the balance sheet, which lists all the company’s assets (cash and cash equivalents, inventory, marketable securities, accounts receivable, etc.) and liabilities (accounts payable, short-term loans, long-term debt) at a specific point in time. The balance sheet is usually divided into two sections – current assets and fixed assets – to provide more clarity about the company’s liquidity and ability to pay its debts.
A more in-depth version of a financial report is the income statement, which breaks down a company’s total revenues and operating expenses to show the net income earned over a given period. Operating expenses can include everything from manufacturing overhead to marketing and sales costs. After listing all the company’s revenues, the income statement typically subtracts the cost of goods sold to arrive at a subtotal known as gross profit or gross margin. If a company distributes its profits to shareholders, this is reflected in the income statement as dividends. The income statement can also include a management’s discussion and analysis section, which explains the significance of certain financial statement items and discusses important trends and risks.
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