The Financial statement is use to show the summery of a business activities and the company’s financial performance either quarterly, monthly, or annually.
After my lectures on Saturday, I realised that an annual report and a company’s financial report were two different things. All along, I thought that both financial report also known as financial statement and annual report were same thing. Annual report was defined as the comprehensive report, detailing the company’s activities through out the year while financial report is the end product of the account process.
WHAT ARE THE OBJECTIVE OF A FINANCIAL STATEMENT:
- A financial report helps management in making good decisions concerning the firms objectives.
- A good financial report will help you know the current position of the firm in terms of asset.
- Good reports helps management to plan, control and monitor things that are happening in the firm.
- It helps to facilitate statutory audit.
- Lastly, it provides financial information about the company.
Another thing we need to know about financial report are the users. Generally, people will think that those who needs to prepare the financial report are just the accountant, but during my classes, my lecturer mentioned that even managers and directors also need to know how to prepare the financial reports in other to be able to take certain decisions.
WHO ARE THE USERS?
- MANAGER: A manager needs the financial report to be able to plan.
- SHAREHOLDERS: They need the report to make informed decisions about their equity investment.
- EMPLOYEES: Employees use the financial report to check if the company is making profit.
- GOVERNMENT: The government uses financial report for the purpose of taxation.
- LENDERS: The lenders uses the report to know the profit margin of the borrower.
- CREDITORS: They use the financial statement to determine if the business as the capacity to repay debt as agreed.
- TAX AUTHORITIES: Analysing a financial report helps them to know the levy of various types of tax on the business.
Finally, a financial report shows the company’s transaction that is expressed in a monetary terms and also shows if a company is profitable or not. Therefore, before making investment in companies, always ask for their financial records so you know their profit strength.