Importance of Financial Data
Financial data or financial statement are information that pertains to sales, purchases, as well as profit levels of companies or organization. The data is mostly used to analyze the management performance as well as determine the strategies used to improve the company’s performance. Furthermore, companies use the financial data to judge its creditworthiness and decide whether to invest in the business and determine if the company is complying with government regulations. The written reports are essential since quantifying the financial strength, performance, and liquidity of a company as well as reflecting the financial effects of business transactions and events on the entity. Equity, assets and liabilities are the main types of financial data that are used by most companies to determine their financial position. Assets, for instance, refers to everything that a company owns, they include both tangible and intangible property, personal property and real property. The main types of assets include tangible property is any physical property, such as equipment, furniture, tools, or inventory whereas intangible property is non-physical property, such as a patent or goodwill, besides, real property is real estate and anything that is attached to it while personal property is any property that is not real property.
On the other hand, liabilities refers to the financial obligations of a company, such as what the company owes to others including debt, which is money owed to a lender along with any interest as well as accounts payable, which is money owed to suppliers for goods and services bought by the company. In addition, liabilities can include other obligations such as wages, benefits, and taxes. Short-term refers to the obligation will come due within a year while long term is the liability that comes due in a year or longer. On the other hand , equity is the value of the company left over after the company has paid all of its liabilities out of all of its assets.
Financial statements are important to companies in a number of ways. Besides, lack of understanding of a company’s level of stock, the investors will end up missing out on buying and selling opportunities if they base investment decisions solely on a stock’s market value. Besides, the statements enable the investors to know the whether shares are currently affordable; this is as a result of the fluctuations in a company’s trading session. In addition, the financial data assist the analysts to analyze trends in assets and debts as well as the operating profit, net profit and gross profit. Other assisting the financial analyst to determine whether it is safe to invest in a company, the records also offers an overview of the company’s cash flows from operating activities, financing activities, and investing activities. In addition, companies need to understand the changes in the financial market in the past so as to know how the financial market are doing, and where they may go in the future.
