Preparing annual and quarterly financial statements is a crucial part of a business because such reports are important in evaluating the performance of the business.
Quarterly financial statements indicate the financial condition of the business in a three-month period. In this article, you will learn all the important information regarding quarterly financial statements.
A quarterly financial statement, or quarterly report, is a type of financial statement that is issued after every three months. It simply means that a company releases four quarterly financial statements in a year.
The purpose of publishing such statements is to summarize the financial health and performance of a business. The law makes it obligatory for most companies to publish quarterly financial statements.
A thorough quarterly report includes a variety of financial reports that represent the financial health and growth of an organization.
Moreover, this report includes all of the essential information like the income statement, balance sheet, and cash flow statement.
Quarterly financial statements are important in helping business owners and managers make smart strategic decisions.
Moreover, they are also useful in attracting investors by showing the financial health and growth of the company.
Shareholders can use quarterly reports for not only learning about the performance of the company but also to compare it with former quarterly financial reports to draw a conclusion on the future of the company.
You can use the process of quarterly reporting to regularly update your business performance. Therefore, the shareholders, directors, and investors will be getting the latest information about your company.
The three most important parts of a quarterly financial report are the income statement, balance sheet, and cash flow statement.
An income statement represents the profits and losses of a company. Preparing the income statement of a multinational enterprise can be quite challenging as there are numerous aspects that need to be considered in this process.
The process can be made easier by getting the professional services of an accounting firm in Malaysia.
Typically, it involves calculating the sales and total income of the business in a quarter. The amount of the closing stock is subtracted from the amount of opening stock and net purchases.
The difference between the total sales and calculated amount will represent the gross profit or loss of the company in the quarter. Other financial data, like operating expenses, insurance, utility bills, rent, and salaries, are also considered to determine the net profit or loss.
The purpose of a balance sheet is to compare the business assets with the owner’s equity and liabilities. The following equation is the basis of a balance sheet:
Assets = Capital + Liabilities
Accounting and audit firms in Malaysia provide their professional services to prepare a thorough balance sheet. Generally, creating a balance sheet involves creating three different columns in the sheet and writing the value of every fixed asset in a designated column.
Proper calculations are made to calculate the worth of the assets and determine the depreciation value. After calculating various types of liabilities and capital expenditures, the amounts are added to evaluate the quarterly owner’s equity.
A typical cash flow statement is divided into the following three main areas:
This kind of statement includes the revenue generated from different sources like sales, securities, and dividends. Companies that are relying on the services of accounting firms in Malaysia will find it quite easy to maintain and update the cash flow statements on a regular basis.
It is important to note that the difference between the cash inflows and outflows represents the overall cash flow from the operating activities.
Income from long-term assets like equipment and buildings is included in the investing activities. Moreover, the cash flow from the financing activities includes the revenue generated through long-term debts and owner’s equity.
It also includes the cash outflows on different debt repayments. Once all of these activities are determined, the company will have a thorough cash flow statement to be included in the quarterly financial statement.
The managers and owners of the companies should pay special attention to the importance of the quarterly financial statements.
Some companies make the mistake of not considering such reports to be important. In certain cases, it can result in some serious legal issues.
Therefore, every company should consider quarterly financial statements to be an effective tool for financial planning.
Moreover, comparison of different quarterly reports ensures companies make smart business decisions for profit maximization.
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