There is an old saying that “Knowledge is power.” That is certainly the case for every business. No smart business owner should ever guess what his/her cash balance is or take a rough “shot” at last month’s income or operating expenses. No! A key to success in business is careful preparation and wise use of quarterly reports, a summation of the financial statements. As Warren Buffet stated, “You have to understand accounting and you have to understand the nuances of accounting….how to read financial statements.”
What are Quarterly Reports?
A quarterly report is a collection of financial statements issued by a company every three months. Public companies are required to file this report with the Securities and Exchange Commission using form 10-Q. Quarterly reports typically include an income statement, balance sheet, statement of stockholders equity, and cash flow statement for a specific three-month calendar quarter and year-to-date, along with comparative data for the prior year.
Quarterly reports usually also provide an executive summary, company goals, highlights for the period along with any new or ongoing challenges. It is essential that all financial data is carefully and accurately prepared and properly recorded. All users benefit from a comprehensive “picture” of the business and its conditions as reflected in the report.
Why are Quarterly Reports Important?
Quarterly reports and the included financial statements are an important reflection of the financial position and performance of a company. They are important because they:
- Show the performance and value of the company.
- Give others a way to measure the company.
- Help the business owners manage the company.
Quarterly reports are used to compare a company’s current and past performance to predict its future health, performance, and growth. Quarterly reports are considered interim reports. Similar reporting for a full year is called an annual report.
Who Uses Quarterly Reports and Why?
Quarterly reports are used by a wide range of users:
- Business owners and management, to manage the affairs of the company.
- Shareholders, to assess the risk and return of their investment in the company.
- Prospective investors, to gauge the viability of an investment.
- Financial institutions, to decide whether to provide a loan and to determine a company’s continuing ability to pay on a loan.
- Suppliers, to assess the creditworthiness of a company and whether to supply goods or services on credit.
- Customers, to determine the company’s continuing ability to provide goods/services.
- Employees, to evaluate the future potential of their employment.
- Competitors, to understand a company’s performance to respond with competitive strategies.
- The general public, to get insights on a company’s impacts on the economy, the environment, and on public policies.
- Government entities, to determine the correctness of tax filings and to measure overall economic progress.
All financial data is generated from the internal accounting documents and records of a company. For the information to be useful and contribute to good decision-making, it is essential that the records are completed accurately and consistently.
Get Expert Financial Assistance That You Can Rely On
Contact Doerhoff & Associates, CPA, based in Jefferson City, MO for professional financial, accounting, and financial statement assistance that you can count on. Doerhoff & Associates has one goal in mind, to provide comprehensive business accounting services designed specifically for your success.
