*Knowledge Nugget:
Utilizing financial reports is vital for companies aiming to grow and become more competitive in the market.
The competitiveness in the job market implies having all aspects of a company under control. Financial reports are one of the most important tools for a company as they allow for better decision-making, identifying management errors, or new business opportunities. And we accompany you in doing this, we do it for you.
First of all, what is a financial report?
A financial report, financial statement, or accounting report is a document that allows knowing the economic status of a company, entity, organization, or even an individual person. It is built from data recorded during a specific period, such as a month, a quarter, or a year.
“Financial reports are a key element for companies, as they allow turning raw data, which by themselves have little or no value, into valuable information about the economic status of the company.”
What is the purpose of a financial report?
The utility of financial reports goes far beyond knowing the economic status of a company. Objectively, that is its main utility. For example, an annual balance sheet allows knowing the performance of a company for a year. If superficially viewed, it may not seem like a highly useful tool. However, analyzing a financial report in-depth can be vital to anticipate potential problems or confirm that the strategy being used is the most appropriate, make more accurate decisions, and many other advantages that increase the profitability of companies.
There are different types of financial reports that can be very useful for companies, from a general balance sheet to a payroll report.
Types of financial reports
Currently, there are various types of financial reports, from very specific ones to know the status of something very concrete to general reports that allow having a global view of the economic status of a company.
Balance Sheet
The balance sheet or general financial statement is one of the essential reports for all companies. It is a basic accounting report as it allows knowing the overall economic status of a company at any given time. To prepare it, both financial assets (income, stocks, investment, liquidity, etc.) and liabilities (debts to suppliers, loans, promissory notes, etc.) must be taken into account.
Income Statement
The income statement is a type of financial report that allows knowing in detail how income and expenses were obtained during a specific period of time. It is a closed financial statement that covers a specific period, usually a calendar year. It breaks down income and expenses into different categories to obtain a gross result (before taxes) and net result.
Statement of Changes in Equity
This basic financial statement shows the incomes and outflows of operations throughout the year, as well as the changes in equity that they have entailed. This includes distributions of profits and dividends declared during the period, as well as movements of profits, reserves, premiums, accounts, and equity revaluation.
Cash Flow Statement
The cash flow statement diagnoses the money that the company has obtained over the last year, examining the amounts, origins, and use of cash.
This basic financial statement provides valuable information about the company’s ability to have the necessary cash for specific situations, as well as liquidity and solvency requirements.
Generally, this financial statement is analyzed based on the different groups of activities. These are:
- Operating activities.
- Investing activities.
- Financing activities.
Now that we understand the importance of financial statements, are you ready to take your company’s performance to the next level? Contact us today and start working with our team of financial report experts! Together, we can maximize your company’s potential and achieve your financial goals efficiently and effectively. Don’t wait any longer, your financial success is just a click away!
