Financial Statements Types of Financial Analysis – Our Trade Platform
form Financial Statements Financial analysis and accounting work is the main nerve on which any financial operation of projects, whether individual or collective, of companies or various establishments is based. The ability to understand a company’s financial principles is one of the most vital and useful skills for developing aspiring investors, entrepreneurs, and managers. With this effective knowledge, investors can better identify promising opportunities while avoiding sudden risks and avoiding them as much as possible. Professionals of all levels can make more strategic business decisions when properly aware of the basics of financial statements. Therefore, it is necessary to properly train the specialist, analyst and financial accountant to have the insight to read and advance any document or list related to the company’s mathematical operations. To find out more details about what the financial statements are, their types, the principles of financial analysis, its types, the accounting function and its important responsibilities, follow this article with us on platform to list the most important information with accuracy and detail.
What are financial statements
Financial Statements: It is the financial statements prepared in the form of reports for businesses, commercial or industrial projects, or any individual or joint activity. These reports are prepared and issued by the company’s management to give investors and creditors additional information about the company’s performance and financial position. Also, to form real knowledge about the amount of income the company generates per month, and the amount of profit it also achieves. The aim of preparing these reports is to provide useful financial information to customers or followers outside the company. These reports complement the primary purpose of financial accounting by providing information that helps in the financial decision-making process.
Also read: How are corporate financial statements made?
The importance of financial statements
The importance of the financial statements lies in the methodology of the companies’ work with the following points:
- Develop a comprehensive and integrated view of the company’s financial position.
- Inclusion of the balance sheet that shows the levels of debt and profits in the company, and what is owned or owed from the financial assets.
- Also, provide investors with a clear picture of the company’s profits and how to manage its financial success or failure.
- Familiarizing investors and clients with all financial matters of companies, including profits and asset management, as well as financial leverages and the share of shareholders.
- In addition to the possibility of measuring the relative financial condition of the company and determining whether it is ready to invest or lend money.
Forms of corporate financial statements
The following are all the financial statements prepared by the companies:
- financial income statements.
- Multi-step income statement.
- Profit and loss statements as well.
- The company’s comprehensive income statements.
- emergency financial statements.
- Shareholders’ rights statement.
- Corporate balance sheet.
- Classified balance sheet.
- Statement of financial position.
- List of direct and indirect cash flows.
- Statement of retained earnings.
- preliminary financial statements.
Types of financial data
Financial statements are divided into two basic types
- Temporary lists.
- Annual statements.
Where each type has special features and features that give a clear idea of its importance in the companies’ business strategy and financial plans, which we will explain below in more detail:
Interim financial statements
Financial statements that are issued for periods of less than one year are known as interim statements. This is because they are used as temporary data to judge the company’s financial position until the full and comprehensive annual statements are issued. This data is often released on a quarterly or semi-annual basis, and companies may provide monthly reports to creditors as part of their loan covenants. In addition, quarterly statements are presented, every three months, including financial statements from that three-month period. The semi-annual lists also include data from a six-month time period.
Also read: Types of Financial Accounting
Annual financial statements
The annual financial statements are graphic forms for one time during the year, and they cover the financial performance for a period of 12 months, as they are issued at the end of the companies’ fiscal year, or in the middle of it. Whether during the months of June or July or in the months of December or January.
Categories benefiting from the financial statements
Companies mainly issue financial statements to external groups, and they are as follows:
- investor category.
- class of creditors..
- category of competitors.
- Class organizers.
Investors and creditors benefit from the financial statements through the following:
- Data analysis to base their financial decisions on.
- They also study additional financial reports such as financial statement notes and management discussion as their primary financial reference.
- As well as comparing the income statement and balance sheet accounts with each other to see how efficiently the company uses its assets to generate profits.
- Also examining the company’s debt levels and shareholder equity; In order to determine whether companies are properly financing operations and expansions.
Financial accounting methods
Companies know the generalities of financial statements better than the initial investor, so they plan specific methods for accounting and financial statements. They fall within the following:
- Dividends: The concept of earnings per share (EPS) is a method of financial accounting for companies. Whereas, EPS calculates the total profit of a company distributed across its ordinary inventory outstanding. Shareholders often use this number to predict how they will benefit from the company’s growth.
- Financial Ratios: These are handy tools for obtaining information about specific metrics. As it represents one of the vital elements of the company, on which it depends to start the basics of preparing the financial statements. Including the price-to-cash-flow ratio, the price-to-earnings ratio, as well as the asset turnover ratio and the company’s current ratios.
- Revenue Account: Revenue can be measured, at various points in a company’s complete sales cycle. This can also have a significant impact on how actual earnings are presented. Different revenue recognition forms can also; Accounting for sales as complete before the customer receives the item or service that they purchased.
The balance sheet of the financial statements
The balance sheet provides clear actual reports on all the company’s ownership (assets), all that is owed (liabilities), as well as all the remaining financial matters to net or book value. The balance sheet is important in calculating many of the ratios and numbers that analysts use when talking about the correct financial conditions of a company. The importance of balance sheets and their primary role is also shown by the following items:
- Show the balances of each of the company’s asset and liability accounts.
- Also, a statement of the company’s financial ownership and debts, if any.
- Investors rely on the balance sheet to see how easily a company can meet short-term financial needs by comparing cash and cash equivalents to current liabilities.
- In addition, balance sheets show details of a company’s ownership, such as shares outstanding, convertible securities, and other financial assets.
The concept of financial analysis
Financial analysis: It is a process often associated with the preparation of financial statements, as it represents an evaluation of businesses, projects, budgets, and financial transactions. This is in order to determine its performance and suitability, and financial analysis is often used to indicate the status of the company or project, whether or not it is profitable for cash investments.
For your information, financial analysis can be carried out internally, including helping fund managers make future business decisions or reviewing successful goals and plans in advance. Financial analysis can also be conducted externally, by supporting investors in selecting the best possible investment opportunities.
Types of financial analysis
Common types of financial analysis approved by companies are:
- Vertical financial analysis.
- As well as horizontal financial analysis.
- Also development financial analysis.
- profitability financial analysis.
- In addition to the analysis of financial liquidity.
- Turnover analysis.
- Also analyze risk and leverage.
- stability analysis.
- and coverage analysis.
- Rate of return analysis.
- Cash flow analysis.
Duties of a financial analyst
Financial analysis necessarily requires a professional financial analyst who, in performing his responsibilities, relies on accuracy and correct sources in order to avoid any potential or emergency error when preparing lists or evaluating the financial position of companies in general. Among the most important tasks assigned to financial analysts are the following:
- Developing organized plans for the preparation of financial reports.
- Finding financial formulas and accounts in a simple way that is understandable to the owner and investor.
- Writing and entering notes and comments in their spreadsheets, whether in paper or electronic form
- Preparing audit schedules.
- Reviewing financial data, plans and schedules.
- Organizing checks.
- Use spreadsheets and graphs to present data.
Also read: Income Statement Forms Income Statement Objectives
What is the job of a financial accountant?
The financial accountant works in many companies and projects with a commercial or industrial orientation. Where he works on studying and evaluating the lists and financial information of his place of work, whether it is a huge company or a start-up business. His responsibilities also vary depending on the type and size of the organization he works for. All companies announce their need to hire financial accountants to work for them. With the aim of preparing financial statements and reports and reporting on the company’s financial position with external clients. As well as staying abreast of the latest economic trends that affect financial decisions.
Read also: What does financial accounting offer
Financial accountant responsibilities
The financial accountant has a prominent set of tasks and responsibilities, which are as follows:
- Preparing financial statements: The financial accounting profession involves preparing various types of financial documents, such as balance sheets, income statements, and cash flow statements. These documents summarize the financial performance of the company’s owners, investors and parties outside the company.
- Data processing: Financial accountants collect financial data for their companies and monitor them constantly. Including sales revenue, cost of goods and other expenses. This data makes it possible to complete other major financial accounting tasks.
- Work in accordance with the state’s financial regulations: the successful profession of financial accountants requires; Full understanding and awareness of state regulations and accepted accounting standards guidelines for industry and commerce. These regulations help ensure the ethical management of data, the accuracy of its preparation and the lawful handling of funds.
- Preparing budgets: Most financial accountants work in preparing budgets for entire companies or for specific departments. Preparing a budget requires understanding the company’s objectives, estimated revenues, and projected expenses.
- Create backup copies of financial files and keep them until needed and requested.
- Entering financial data into electronic accounting programs on the computer.
Financial accountant skills
The following are the most important skills that a financial accountant must have:
- Correct handling of financial statements, and familiarity with how to prepare them.
- Precision and attention to detail.
- As well as the ability to see the future of the financial situation of the company in which he works.
- Professional dealing with computer hardware and software.
- Communicate and interact with co-workers and the administrative and technical department in the company.
- Possess critical thinking.
- The ability to make the right decisions that serve the course of action.
- The ability to learn continuously and keep up with everything new in the world of finance and accounting.
In the conclusion of our article, these were the most important thoughts about Financial Statements And its types and related work of financial analysts and accountants also within the framework of providing a clear idea for everyone interested in the field of entrepreneurship and its development, whether he is an investor or owner of money and companies of businessmen and their new pioneers.