A financial report is a formal document used to comprehensively record and reflect an enterprise’s economic conditions, operating results and cash flow in a given period. It includes the core financial statements of balance sheet, income statement and statement of cash flows, as well as supplementary reports like management’s discussion and analysis (MD&A), detailed sales reports and other trend analysis.
Internal stakeholders rely on accurate, timely financial data to inform strategic decision-making. They want to understand trends, predict future financial development and gain insights into ways they can boost revenue, improve profit margins and mitigate potential risks. A financially-sound business can also build trust with partners and investors, as well as maintain long-term cooperation relationships based on mutual benefits.
Creating a financial report requires a high degree of accuracy, precision and consistency. It must meet regulatory requirements for companies that file with government agencies, such as the Securities and Exchange Commission, as well as those of the company itself. In large enterprises, financial reporting is often a team effort led by a CFO and the finance department. In smaller organizations, it may be the responsibility of a lead staff accountant or the business owner. The scope and complexity of financial reporting varies according to the information needs of different audiences. External reporting is largely focused on meeting the requirements of investors, creditors and other outside parties. Therefore, it usually has more stringent standards than internal reporting. For example, a balance sheet must clearly present assets, liabilities and owner’s equity.
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