Importance of Financial Reports: Purpose & Key Components

Financial reports are prepared to provide stakeholders with information about the financial position, performance, and cash flows of an organization. The purpose of financial reports is to help stakeholders make informed decisions about the organization, such as whether to invest in it, lend money to it, or do business with it. Financial reports also help management to assess the organization's financial performance, identify areas for improvement, and make strategic decisions about future operations. The key financial reports include the income statement, balance sheet, and cash flow statement.