What do you do if financial statements are difficult to analyze and interpret in business reporting? (2024)

Before you dive into the details, you need to understand the basics of financial statements. There are three main types of financial statements: the income statement, the balance sheet, and the cash flow statement. Each one shows a different aspect of the company's financial situation. The income statement shows the revenues, expenses, and profits or losses for a period. The balance sheet shows the assets, liabilities, and equity at a point in time. The cash flow statement shows the sources and uses of cash for a period. You should be familiar with the structure, purpose, and meaning of each statement, as well as the key ratios and indicators that can be derived from them.

One way to make financial statements easier to analyze and interpret is to compare and contrast them with other sources of information. For example, you can compare the current financial statements with the previous ones, to see how the company has changed over time. You can also compare the financial statements with the industry benchmarks, to see how the company performs relative to its peers. You can also compare the financial statements with the company's own goals, plans, and projections, to see how well the company is meeting its expectations. By comparing and contrasting, you can identify the strengths, weaknesses, opportunities, and threats of the company.

Another way to make financial statements easier to analyze and interpret is to ask questions. You should not take the numbers at face value, but rather dig deeper and look for the underlying causes and effects. For example, you can ask questions such as: Why did the revenue increase or decrease? What are the main drivers of the costs and expenses? How did the company finance its assets and operations? How did the company manage its cash flows and liquidity? How did the company create value for its shareholders? By asking questions, you can uncover the story behind the numbers and gain insights into the company's strategy, performance, and potential.

A third way to make financial statements easier to analyze and interpret is to use tools and techniques that can help you organize, visualize, and simplify the data. For example, you can use spreadsheets, software, or apps that can help you input, calculate, and format the financial data. You can also use charts, graphs, tables, or dashboards that can help you display, compare, and highlight the financial data. You can also use methods such as horizontal analysis, vertical analysis, trend analysis, or ratio analysis that can help you break down, relate, and evaluate the financial data. By using tools and techniques, you can make the financial statements more accessible and understandable.

A final way to make financial statements easier to analyze and interpret is to seek feedback and guidance from others who have more experience or expertise in financial reporting. For example, you can consult your colleagues, mentors, managers, or trainers who can help you review, explain, or verify the financial data. You can also seek external sources of information, such as analysts, auditors, consultants, or educators who can provide you with additional perspectives, opinions, or recommendations. By seeking feedback and guidance, you can learn from others and improve your skills and confidence in financial reporting.

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

Business Reporting

+ Follow

Thanks for your feedback

Your feedback is private. Like or react to bring the conversation to your network.