There are several objectives of making the financial report of a firm. Few can be listed as follows:
- It provides information on the credit and investment decisions made by the firm.
- It provides the required information for assessing the cash flow (securities, income earning, profit and loss decisions for lenders)
- It gives essential information about economic resources that include shareholder claims, claims made by creditors, and provides clarity to other financial claims, etc.
- It provides information about the financial results, profit and loss information or expenses made during certain periods, etc.
- It gives clear information on the liquidity and solvency of the firm. It provides information on how the firm gets the funds required for running the business and how it utilizes the funds received. It also explains the lenders about the ways of investing money in the business.
- Every business enterprise needs to get the results of its performance to go forward and plan the business. It needs to understand its financial position after a certain period. Usually, after one year, a business stabilizes and requires forecasting. Here, the financial report plays a big role. It not only shows a clear picture of the financial position but also directs towards future decision-making. It shows the accounts of the last date is the financial year-end, and with the help of the balance sheet, it shows the balances for future business investments.