Plan finances for new business ventures

Finance principles

The purpose of financial reports Financial reports are critical in managing a business.

They provide a clear picture of the true financial position of the business at the present time.

They also provide with projections or forecasts, an indication of the expected future performance of the business.

Financial reports are usually updated monthly or three-monthly and may be distributed or used by: Company Directors Senior management Investors Bankers and other financiers

Financial Reporting In relation to financial planning, financial reporting is a key task that involves documenting and presenting the financial information of a business venture. The resulting document of financial reporting is, as the name suggests, a financial report. Often, the financial report is also referred to as the financial statement. It contains key information such as the business ventures use of resources, financial strategy, financial achievements, and key areas where the business can improve. The financial report is considered a tool of crucial importance to any business. This is because it communicates key information on the financial state of the business, enabling those concerned to understand its financial capacity and assess its overall value. Those concerned are the stakeholders of the business venture both internal and external. Through the financial report, the financial viability of a new business venture is established. It is, therefore, instrumental in ensuring that the business has the potential to further grow.

1. Explain the purpose of financial reports