What is Financial Reporting?
Financial reporting is a process of preparing and presenting financial data about a company’s financial position, the company’s operational performance and its flow of funds for an accounting period. Financial Reports usually take the form of Financial Statements.
There are four basic financial statements:
- Balance Sheet: also referred to as Statement of Financial Position or Condition. A balance sheet also reports on a company’s assets, liabilities and ownership equity as at a given point in time.
- Income Statement: also referred to as Profit and Loss Statement (or a “P&L”) reports on a company’s income, expenses and profits over a period of time. Profit & Loss Statements provide information on the operation of the enterprise. These include sale amounts and the various expenses incurred during the processing state.
- Statement of Retained Earnings: explains the changes in a company’s retained earnings over the reporting period.
- Statement of Cash Flows: reports on a company’s cash flow activities, particularly its operating, investing and financing activities. A cash flow statement essentially tracks the money that is coming in and going out of the business at a particular point in time. This allows business operators to plan for when large expenditures are due or when large payments will be received.
The Purpose of Financial Reporting
Financial Reports may be required by various parties in order to produce an objective evaluation of a company’s true financial position and performance. These reports can also assist with making informed economic decisions. Situations where financial reporting may be required include:
- Owners and managers require financial statements to make important business decisions that affect its continued operations. These statements are also used as part of management’s annual report to the stockholders.
- Prospective investors make use of financial statements to assess the viability of investing in a business.
- Financial institutions (banks and other lending companies) use them to decide whether to grant a company with fresh working capital or extend debt securities (such as a long-term bank loan or debentures) to finance expansion and other significant expenditures.
- Government entities (tax authorities) need financial statements to ascertain the propriety and accuracy of taxes and other duties declared and paid by a company.
- Vendors who extend credit to a business require financial statements to assess the creditworthiness of the business.
Does your company need assistance with financial reporting?
The Quinn Group has the professional knowledge and experience to undertake all aspects of financial reporting to meet your business requirements.
If you would like to arrange an appointment or you would like more information, please submit an online enquiry form or call us on 02 9223 9166.