It can be helpful to explore a theoretical financial report example. The following section will show the three main types of financial statements for a theoretical company named company ABC. Each statement will be accompanied by a brief explanation.
Balance Sheet for Company ABC as of December 31, 2020
Assets:
- Cash and cash equivalents: $1,000
- Accounts receivable: $2,000
- Inventory: $3,000
- Other assets: $4,000
Total assets: $10,000
Liabilities:
- Accounts payable: $1,000
- Other liabilities: $2,000
Total liabilities: $3,000
Stockholders' equity:
- Common stock: $4,000
- Retained earnings: $3,000
Total stockholders' equity: $7,000
Total liabilities and stockholders' equity: $10,000
The balance sheet for company ABC shows that the company has total assets of $10,000 and total liabilities of $3,000. This leaves stockholders' equity of $7,000. Stockholders' equity is the portion of a company's assets that belongs to the shareholders. It is calculated by subtracting liabilities from assets.
Income Statement for Company ABC for the Year Ended December 31, 2020
Revenue:
- Sales: $10,000
- Other revenue: $1,000
Total revenue: $11,000
Expenses:
- Cost of goods sold: $4,000
- Selling, general, and administrative expenses: $3,000
- Depreciation and amortization expense: $2,000
Total expenses: $9,000
Income from operations: $2,000
Other income (expense): $(500)
Net income: $1,500
The income statement for company ABC shows that the company had total revenue of $11,000 and total expenses of $9,000. This left income from operations of $2,000. Other income (expense) was $(500). This resulted in a net income of $1,500.
Cash Flow Statement for Company ABC for the Year Ended December 31, 2020
Operating activities:
- Net income: $1,500
- Adjustments for reconciling net income with net cash provided by operating activities:
- Depreciation and amortization expense: $2,000
- Changes in assets and liabilities:
- Accounts receivable: $(1,000)
- Inventory: $500
- Accounts payable: $500
Net cash provided by operating activities: $3,500
Investing activities:
- Purchase of property and equipment: $(4,000)
Net cash used in investing activities: $(4,000)
Financing activities:
- Issuance of common stock: $4,000
Net cash provided by financing activities: $4,000
Net increase in cash and cash equivalents: $3,500
The cash flow statement for company ABC shows that the company had net cash provided by operating activities of $3,500, net cash used in investing activities of $(4,000), and net cash provided by financing activities of $4,000. This resulted in a net increase in cash and cash equivalents of $3,500.
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FAQs
Financial analysis and reporting helps organisations to clearly communicate how well they are doing financially. This, in turn, builds trusted relationships with investors, shareholders, employees, and customers.
What are the 5 steps of financial reporting? ›
Defining the accounting cycle with steps: (1) Financial transactions, (2) Journal entries, (3) Posting to the Ledger, (4) Trial Balance Period, and (5) Reporting Period with Financial Reporting and Auditing.
What is the summary of financial analysis and reporting? ›
Financial reporting and analysis is the process of collecting and tracking data on a company's finances on a monthly, quarterly, or yearly basis. Businesses use them to inform their strategic decisions, gain new investors, and comply with tax regulations.
What is financial reporting in simple words? ›
Financial reporting is the process of producing financial statements that disclose an organization's financial status to stakeholders, including management, investors, creditors and regulatory agencies.
What is financial reporting in simple terms? ›
Financial reporting is the way businesses communicate financial data to external and internal stakeholders. External stakeholders — like regulatory agencies, current and potential shareholders and investors, and lenders — use financial reports to draw conclusions about a company's current and future financial health.
What are the 4 principles of financial reporting? ›
There are four basic principles of financial accounting measurement: (1) objectivity, (2) matching, (3) revenue recognition, and (4) consistency. 3.
What is financial analysis with an example? ›
Financial analysis is the process of evaluating businesses, projects, budgets, and other finance-related transactions to determine their performance and suitability. Typically, financial analysis is used to analyze whether an entity is stable, solvent, liquid, or profitable enough to warrant a monetary investment.
What are the 4 types of financial reporting? ›
There are four primary types of financial statements:
- Balance sheets.
- Income statements.
- Cash flow statements.
- Statements of shareholders' equity.
Financial reporting is intended to help track a business's income, cash flow, profitability, and overall viability in the long run—but it needs to be done correctly. The goal of financial reporting is to present financial information that is complete, accurate, comparable, verifiable, understandable, and timely.
What is the primary purpose of financial reporting? ›
One, the primary objective of financial reporting is to provide useful information so that investors, creditors and other users can make rational decisions.
Financial reporting are simply the numbers the company reports to track its performance. Such as monthly, quarterly or annual accounts. Financial analysis is the analysis you do based on those numbers. You can analyse the individual product's performance, profitability, cash flow conversion, etc.
What is an example of an analysis report? ›
What are two examples of analytical reports? Two examples of analytical reports would be a report on investigating business opportunities and report on problem solving. An example of investigating a business opportunity would be if a company did a report on expanding their product into an additional market.
What is a financial analysis worksheet? ›
The FAW is a multi-page document (spreadsheet) that allows for the fiscal analysis that compares the current method of addressing a business problem to various alternative approaches. A key concept of this review is to develop apples-to-apples comparisons of various component cost and revenue impacts.
Why study financial analysis and reporting? ›
Informed decision-making
Financial reporting and analysis provide insights into a company's financial health, enabling management to make well-informed decisions on investments, resource allocation, expansion, and other strategic initiatives.
What does a financial reporting analyst do? ›
Classification Responsibilities: A Financial Reporting Analyst is responsible for developing internal and external financial statements and reports; preparing detailed financial records; and reviewing and analyzing current and future reporting needs within the Office of Management and Budget (OMB) and/or Financial ...
What is the main objective of financial reporting? ›
The objective of financial reporting is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders, and other creditors in making decisions about providing resources to the entity. Financial reporting requires policy choices and estimates.
