Types of Financial Information (Explained)

Introduction

Financial Information can be regarded as a highly important factor that can be an increasingly important component of decision-making for different types of stakeholders. The underlying objective behind the preparation of financial information vests on the grounds of presenting information relating to the company’s performance over the respective course of time.

Hence, the importance of financial statements can be judged because it stands to be an integral component that showcases how the company has performed on various domains, which can be applied to various stakeholders and scenarios depending on the information they require.

There are numerous different types of financial information presented and relevant to conducting a financial analysis of the company.

It is also important to realize that the company presents financial information that is supposed to be used for various purposes, which primarily vest on the grounds of transparency and complete disclosure. Therefore, this information is disclosed, according to law and accounting. Hence, the types of financial information that are presented in the form of statements are presented below.

Types of Financial Information

Income Statement

Speaking of the Income Statement, it can be seen as a financial statement that presents the information in the form of revenue and expenses that have been earned or incurred over the respective time period. This includes information regarding the expenses that have been paid by the company, on different accounts, pertaining to different transactions that have taken place.

The financial information that is presented in the financial statements is mainly presented in order to depict the expense threshold of the company, in addition to the profitability of the company.

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The profitability of the company is also depicted through the Income Statement because it presents a surplus (or deficit) of revenue over expenses.

Balance Sheet

As far as the Balance Sheet is concerned, it can be seen that it provides financial information in the manner that it shows assets and liabilities in comparison to the capital that the company generates.

The Balance Sheet is therefore presented to depict financial information in order to help the stakeholders assess the underlying financial status of the company, in terms of the financial stability that the company has.

The financial information presented in the Balance Sheet is mainly represented to help stakeholders like creditors and lenders evaluate the ability of the company to pay them back.

Cash Flow Statement

The Cash Flow Statement is presented as Financial Information to list the company’s cash incomings and outgoing from the company’s bank account. The company’s liquidity position is a very important indicator that helps convey important information about the ability of the company to pay back its short-term obligations.

The financial information that is presented in the cash flow statements is divided into three parts, including Operating Expenses, Investing Expenses, and Financing Expenses. The breakup is provided up in order to bifurcate expenses to depict which proportion of cash is spent on the respective areas.

Financial Information Uses

Therefore, it can be seen that financial information that is presented within the company is presented to ensure that decision-making can be carried out on basis of the historic performance of the company.

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This is an integral part because it helps identify the company’s weaknesses and subsequent areas of improvement. The financial information can be duly utilized in order to conduct vertical and horizontal analysis, including ratio analysis that can highlight the underlying issues within the company.

Therefore, the financial information type that exists within the company can be broadly categorized into transactions, annual statements, press releases, as well as other relevant information that can be used to draw a financial analysis of the company.

Conclusion

Financial Information for a company forms is an increasingly important factor that helps decision-makers analyze the company’s performance based on the historic events that have taken place in the company.

In this aspect, the financial aspect can be broadly defined as information that acts as an aid to conduct a better financial analysis of the company, so that proper concrete information can be derived about the company on a comparative basis.

Hence, financial information that companies present is used for multiple different purposes, for different users. Therefore, there are respective and different types of information that are prepared for different users, depending on the decision that they need to take in this regard.