Financial Reporting - A Brief Overview

It is widely understood that finance is a crucial element in the functioning of any company. In making strategic management decisions, you need to know and grasp the organization's income, costs, assets, etc. One way of ensuring this is financial reporting.

This entails providing the many stakeholders of the organization with financial information. It usually relates to financial statements being issued, which helps to monitor an organization's financial situation. In a particular framework, information is provided to facilitate comprehension.

There are different types of financial reporting

There are different ways of conducting financial reporting, which are as follows:

• Issuing financial statements

• Notes/Remarks in the financial statements

• Periodical reports to the stakeholders

• Issuing a clear prospectus

• Disseminating financial information through the site, PRs, conferences, etc.

Understanding Financial Statements

Financial statement issuing is a highly essential technique of reporting financial information. There are three critical components to a financial statement – income statement, balance sheet, and cash flow statement. There are three components of the balance sheet: assets, liabilities, and equity of the shareholder. This provides insight into the company's financial value as regards book value.

A revenue statement provides information on the company's revenue and costs, hence net profit or net loss. Finally, a cash flow statement shows the cash flow from operating, investment, and finance activities of the organization. Through this statement, the company's financial performance, known as the analysis of the financial statements, is further analyzed.

What does Financial Reporting achieve?

There are numerous objectives and goals in financial reporting. The main aim is to provide different stakeholders with information to assist them in their tasks and decisions.

• To support organizational management in carrying out the planning, analysis, and decision-making activities.

• Allowing creditors, investors, and other stakeholders to make a sound investment, credit, etc., decisions.

• If it is listed, financial reports assist shareholders, and the general public learns about the company's success.

• Information on the organization's economic resources, whether they are debts or the owner's equity, and how these vary over time.

• Facilitate the audit by providing statutory auditors with information.

• Looking at the benefits and social welfare and goodwill of employees, the Government, and trade unions.

Conclusion

Both merits and drawbacks are present in the financial reporting & analysis. Some people may argue as to whether or not the benefits exceed the cost. Some say that sums and information are shown in such a way that the organization looks good. Therefore, the company doesn't offer an accurate picture.

However, to promote decision-making and openness, it is vital to reveal the financial facts. It allows investors, banking companies, and lenders to determine if the company invests or loans. More importantly, corporate managers cannot overlook economic facts during crucial decision-making.

If you're looking for an accounting advisory service, we hope these tips have been helpful. Remember to do your research, ask around for recommendations, and make sure you understand the terms of service before signing anything.