Financial reports are made by businesses or individuals. The data shown in the reports are used by investors, market analysts, and creditors to evaluate a company’s financial performance and potential earnings.
No two financial reports will be the same as one another, just as no business is the same. Therefore, not all financial reports are created equal.
This brings us to this blog, where you can learn all about financial reports, including what they are and what you should include in yours.
What Are Financial Reports?
A financial report is a statement that shows the record of financial activity by a business or person, which includes performance. It is used to show data to both internal and external stakeholders, lenders, and investors.
Financial reports can be used to check a business’ health and earnings as well as its financial potential. The data can cover any period but is commonly produced at the end of a month, quarter, or year.
The Benefits of Financial Reports
The benefit of your financial report is that it shows how your business operates and how healthy it is financially. It provides insight for stakeholders and potential shareholders, investors, and lenders into how much revenue a business generates. It draws conclusions on how a company operates, how efficient it is with cash, what its assets and liabilities are, and how it will get on in the future.
The Different Types of Financial Statements
There are different types of financial statements, the main ones being:
- Balance sheet
- Profit and loss statement
- Cash flow statement
- Statement of changes in equity
Find out more information about these four main types of financial statements below.
Your balance sheet is a snapshot of the financial condition of your business at a certain point in time. It states the business’s assets, liabilities, and capital, giving details and the balance of income and expenditure over that period.
The difference between what you own and what you owe is often used as a starting point for valuing a business.
Profit and Loss Statement
This is also known as an income statement and is a report that shows your business’s expenses and revenues. It provides information on revenue that is then transformed into net income or net profit.
Any expenses relating to running a business will be included, such as rent, payroll, and the cost of goods. The profits and loss statement gives insight into how much money the business made and spent, showing the net income figure.
Cash Flow Statement
Your cash flow report will show any changes to the money coming in and out of your business. It includes data regarding all cash inflows and outflows from a company, including its external investment sources and lenders.
The cash flow statement of a business will display whether or not you can cover short-term expenses such as payroll.
Statement of Changes in Equity
Also referred to as a statement of owners, shareholder equity, or statement of retained earnings. In this report, it will state how much money your business keeps rather than how much it pays to its shareholders, for example.
Retained earnings are often used to make debt payments or are reinvested in the business.
What Should You Include in a Financial Report?
Depending on what kind of business you own, the things you include in your financial report will differ. The main things that will be stated include assets, liabilities, net assets/equity, revenues, and expenses.
Your financial report will also include taxes, cost of goods sold, short-term debt, long-term debt, cash flow, investments, accounts receivable, accounts payable, and financing activities.
LJS Accounting Services
At LJS Accounting Services, we offer our award-winning services to you. We understand that everyone’s situation is different, and everyone’s business is different too. This is why we offer bespoke advice and services tailored to your needs.
With our wealth of knowledge and experience in accounting and tax matters, you know your business is in safe hands with us.
We can help with some of the more complex or mundane tasks that come with owning a business. Together, we can handle your business finances, including assistance with your financial reports.
Get in touch with us today if you would like more information or to see how we can help you. Our Liverpool office can be reached at 0151 601 0000, or you can email us at email@example.com, and we very much look forward to hearing from you.