A financial report is a document that contains a business’s historical and current performance data to create a clear picture of the company’s finances. It is an important tool for both investors and internal stakeholders, providing transparency into a business’s performance and profitability and a compass to optimize operational efficiency for growth. Moreover, it is also necessary for demonstrating compliance with regulatory laws and requirements for public companies (in the US, this means giving reports to the SEC).
Financial statements include a trial balance which lists all general ledger accounts at a particular point in time and provides a snapshot of the company’s assets, liabilities, and shareholders’ equity. They also contain footnotes to explain accounting policies, contingencies, and risks. The income statement details the company’s revenues and costs for a specific period while the balance sheet includes an overview of the company’s assets, liabilities, equity, and cash flows.
The supplementary financial information section of a financial report can be used to identify areas for improvement. It can also be helpful in evaluating specific strategies implemented during the reporting period. The management’s discussion and analysis (MD&A) section is an important part of the report because it provides a management perspective on the results, key trends, and risks. It is helpful to write the MD&A using plain language and avoid jargon to make it more accessible for a wider audience. The MD&A should be reviewed carefully to ensure that it complies with regulations and accounting standards.