Financial statements are very important in understanding the information available on how a business is doing and the risks associated with it.
A company must submit financial statements to the regulator and to its own investors. It must also be consistent with its annual reporting to shareholders.
The primary purpose of financial statements is to present the financial information of a company in a reliable and useful format. Financial statements provide a detailed picture of a company’s financial activities over a specific period. By providing this picture, a company is able to make sense of its past, present, and future performance, and the risks involved in doing business. Following are the two main types of financial statements:
The financial statements that are issued for time periods that are shorter than one year are referred to as interim statements.
This is because they are used as temporary statements to judge the financial position of a company until the full annual statements are issued. Companies issue interim statements.
Although interim financial statements are most typically provided on a quarterly or semiannual basis, it is not unheard of for businesses to report to their creditors on a monthly basis as a requirement of the loan covenants they have agreed to. The only financial information that is included in quarterly statements is that which pertains to the preceding three months, as suggested by the statement’s name, which is published every quarter. In a similar vein, the statistics in semi-annual statements cover a period of time spanning a half year.
The annual financial statement form is generated annually and covers a 12-month financial performance period. These statements are often produced at the conclusion of a company’s fiscal year as opposed to the end of the calendar year.
A firm with a June year-end would release its annual financial statements in July or August, whereas a company with a December year-end would release its results in January or February.