Financial Reports
Financial Reports provide an overview of the entity’s (business) position. All business financial information is
revealed in these statements. The financial reports are presented in a set format which is easy to
understand. The most common two are:
Purpose of Financial Reports
The objective of Financial
reports is to provide information about the financial position and performance in a business, as
well as the changes in position of the business. The financial reports is used by a wide range of financial
intuitions in making decisions. The financial reports should be relevant and reliable. Balance sheet show the organization’s
financial position and the income statement show the financial performance of the business. The cash flow
statement shows the flow of cash in and out of the business. Someone with a reasonable knowledge of
business activities should be able to read the information and determine what position the business is in.
Business owners and management use these reports to analysis how the business is performing so as to make decisions
on continuing the operation of the business. The financial analysis is undertaken using the financial ratio between
the income statement and balance sheet
Financial institution such as banks, investors, as well as government entities, media and the general public all
use the Financial Reports to assess the well being of a business. These statements give the financial institutions
a way to check whether a business is viable, whether it warrant being loaned money to expand and enable
government entities to check for the accuracy of the business tax.
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