Financial reporting services is something crucial that every organization need. From the financial reports it gets easier to track a company’s financial performance.

Financial reporting and its analysis is a practice that every organization or business conducts to assess its financial performance in the previous financial year with the help of financial reporting services.

The firm or consultants that provides financial reporting services helps the clients take informed business decisions. It prepares the organization’s or business’ financial statements and reports and gives them a detailed analysis of their financial performance.

It provides the reports of overall profitability of the organizations and businesses after assessing their financial reports.

The main objective of financial reporting is that it provides all the information about the results of the operation, financial position, and cash flow of an organization.

It is done in accordance with the standard accounting practices to give a clear picture of an organization’s or business’ finances that includes revenues, expenses, profits, capital and cash flow.

FINANCIAL REPORTS INCLUDE:

  • Financial statements like income statement, statement of comprehensive income, balance sheet, statement of cash flows, and statement of stockholders’ equity
  • Notes regarding the financial statements
  • Related information through press releases and conference calls
  • Reports to stockholders
  • Finance regarding information posted on the organization’s website
  • Financial reports to governmental agencies including the quarterly and the annual reports to the Securities and Exchange Commission (SEC)

IMPORTANCE OF FINANCIAL REPORTING

Financial reporting provides several important financial information that helps any investor, creditor, or analyst to analyze an organization’s financial performance. It helps the management to track its past successes and gives a picture of what all can be expected in the future.

The following are the major reasons for the importance of financial reporting :-

Financial condition: Any investor to a company will want to know how well the company is doing before he invests. Investors, creditors, and other capital providers analyze the company’s financial reports to safeguard the profitability of their investments.

Stakeholders will want to know where their money went and where it is now. Financial statements such as the balance sheet provides detailed information about the investments and outstanding debt and equity components of the company.

Investors and creditors mainly use this information to get a clear view of the company’s position and capital mix.

Evaluating operations: The information that a balance sheet contains is a record of the asset and liabilities at the end of a financial period of a company. But a balance sheet doesn’t show the record of any operational changes that might have occurred to cause changes in the financial condition of a company.

Investors also need to consider the operating results during the period. Financial reporting on an income statement provides the results about the company’s sales, expenses and profit or losses.

Using this income statement, investors can evaluate a company’s past income performance as well as assess the cash flow in the future.

Stakeholder equity: The statement of shareholder equity shows the changes to various equity components such as retained earnings during a period. It is the difference between the total assets and total liabilities of a company and represents the company’s net worth.

Decision making and forecasting: The analysis of financial statements of a company is very crucial when it comes to decision making. Managers can decide to purchase more assets or sell them off based on any increase or decrease in the values of the assets.

In a nutshell, it can be concluded that financial reporting is very necessary as it contains reliable and relevant information that is used by the investors and stakeholders for numerous purposes. Financial reporting helps in the economic development of a company and establishes the company as a good competitor in the market.