What is a financial report? It is an information document that communicates strong and weak points of a company, helps to convince potential investors to throw the money behind the business. So, writing a strong financial report is what must be done to attract investors and let them take a closer look. But here comes another question, ‘How to write it?’
4 Basic Financial Statements
- Balance Sheet
- Profit & Loss Statement
- Statement of Earnings
- Statement of Cash Flows
It is the information on the present condition of the company. It also includes the equity of an owner, liabilities, and assets.
It gives data on all business operations, namely the income of the company, its profits and all expenses.
This statement reports on the changes in company’s retained earnings.
It includes the activities of the company (financing, operating, and investing).
The title of the first page of the report should be called ‘Balance Sheet’. Then there goes the company’s name and the effective date. The items are reported as of the specific day of the year. The assets are to be on the left and equity/liabilities on the right. List the assets held by the company, equity accounts, and sources of equity. Add the totals of equity and liabilities and check the balance.
The page is to include the company’s name and the covered period of time. List the sources of the income. Don’t forget to mention the earned amounts. It is a must to report the costs of sold goods, record all the operating expenses, and include retained earnings.
Statement of Cash Flows
The page must include the name of the company and the time frame the statement will cover. You are to create an operating activities section that corresponds to the income statement prepared. Set an investing activities section that will correspond to the prepared balance sheet. Mention financial activities section that is related to the equity part of the balance sheet.
Don’t forget to sum up all the categories in the statement of cash flows. They should be labeled as the ‘Increase & Decrease in Cash’.
There should also be some essential notes added. They may contain data on company’s history or plans. For most companies it is a chance to explain what the report means, shows or doesn’t show. Notes are very important as long as they show the company to potential investors and partners from a different angle. This section is known for details about the stock option, tax situation, and pension plans.
Instead of glossing over various economic challenges, it is better to admit threats to the well-being of the company with no fear of chasing investors away. Such financial reports are used not only for large businesses and enterprises. When the company applies for a loan or any type of financial assistance, a report becomes a very valuable tool for accessing a financial status in the most accurate way, both business- and personal-wise.