Financial reporting gives you and your business stakeholders the ability to create strategies from vital data. It helps you and your accounting team track income in real time, monitor expenditures and suggest better ways to allocate resources. It also helps you stay on top of your company’s overall performance with reports like the balance sheet that provides a snapshot of your assets, liabilities and equity at a point in time.
External parties, including investors, creditors and partners, use financial reports to judge a company’s potential for growth and success. They can evaluate a company’s cash flow to determine if they are a good choice for investing or lending money, and analyze the strength of a partnership based on the trajectory of a business’ sales.
A financial statement summarizes all of your company’s major business events in a given period. It includes all current and future cash from investments and sources of capital, as well as any changes to equity. It can also include the company’s accumulated depreciation and the amount of stock options or other share-based compensation that have been granted to employees.
A management’s discussion and analysis (MD&A) is not a formal financial statement, but it is an important component of any business’s annual report. The MD&A explains the company’s management perspective on the results of operations and other factors that affect the company, like regulatory changes or market conditions. It also describes the company’s plans for the future and discusses any key risks that could impact the business.