A corporate financial information statement influences investor confidence.
Reporting financial statements ahead of schedule is a tempting tactic for companies eager to improve investor confidence. Firms that publish economic data before their rivals may see their share values bid up on securities exchanges. Regulators and the public generally sift through firms' accounting reports to appraise performance indicators, such as profitability, solvency and efficiency.
Definition
A corporate financial statement is usually fodder for debate among investors. Corporate financiers review a company's accounting report to identify specific elements that make the firm stand apart, with an emphasis on its liquidity levels. These elements include financial accounts, such as corporate assets, liabilities, expenses, equity capital and revenues.
Types
A full set of annual financial summaries includes a balance sheet, a statement of profit and loss, a statement of cash flows and a statement of shareholders' equity. Also known as a statement of financial position, a balance sheet sheds light on a firm's economic resources, debts and net worth. A statement of profit and loss lifts the veil on a company's revenues and expenses, focusing on factors that affect profit increase or reduction. A profit falloff usually reflects lower sales or higher operating costs. A statement of cash flows, also called a liquidity report, provides insight into three types of cash movements: operating activities, investments and financing activities. A statement of shareholders' equity indicates investments that shareholders make in a company. In addition to financial statements, a publicly listed firm also must disclose significant non-financial data. These footnote disclosures may relate to the company's top 10 clients, long-term expansion plans or senior management's compensation data.
Personnel Involvement
In the corporate context, various professionals combine their expertise and skill sets to make financial reporting a success. These professionals include accountants, financial managers, corporate treasury personnel and tax planners. Companies also consult with investment bankers and financial advisers to ensure accuracy in accounting reports. Equally important, external auditors review internal controls in a company's accounting systems, making sure financial statements abide by industry norms.
Regulatory Compliance
Members of Congress often enact business legislation on the theory that companies, investors and regulators can work together to improve transparency in financial markets. By leveling the playing field for securities exchange players, government agencies ensure that each market participant has access to the same financial information in real time. For example, each publicly listed company must issue its annual reports once, not sequentially, even if it is listed on multiple securities exchanges with different time zones (New York Stock Exchange and London Stock Exchange, for example). Regulatory agencies that oversee the publication of corporate financial statements include the U.S. Securities and Exchange Commission and the Public Company Accounting Oversight Board.
