A financial report is a document that discloses information about the financial health and status of a company or organization. It includes an income statement (a summary of revenue, expenses and net income for a period) and a balance sheet that lists assets, liabilities and equity at a given point in time. It also typically provides additional disclosures such as management’s discussion and analysis, which provide context and commentary on the results of operations. A financial report is a critical tool for investors, regulators and other stakeholders to gain insight into the financial practices and performance of a business.
The legal framework for financial reporting establishes standardized rules and guidelines that businesses must follow when preparing and filing these documents. This ensures transparency and accountability, which helps maintain trust between stakeholders. It also reduces the risk of fraud and other misreporting, and promotes compliance with laws and regulations.
Stakeholders use these reports to assess the performance of a company and its management, and to make decisions about investments and other matters. They want to know how efficient a company is, how much cash it has on hand, and whether it can afford to expand or invest in new projects.
Internal stakeholders, like managers and accounting teams, also use these reports to identify trends and opportunities. They may use them to create strategies for cutting costs, boosting efficiency, and securing future growth. They can also track revenues in real-time, monitor expenditures, and suggest better ways to allocate resources.