Financial Reporting and Financial Statement Analysis are often used interchangeably. However, they share some of the common differences that we are going to discuss in this article. Financial reporting analysis is all about the overall financial analysis taken by business organizations, while financial statement analysis is the process of analyzing a company’s financial statements to make important business decisions.
All financial statements can be called financial reports, but not all financial reports are financial statements. In this article, let us discuss some of the major differences between financial reporting and financial statement analysis.
What is Financial Report Analysis?
Financial Report Analysis is presentable documentation that represents a detailed report of the overall financial processes of a company. A financial report analysis is used to calculate the financial strength of a company based on reports on its growth, assets, liabilities, and equity.
Financial analysts or business analysts create a financial report and analyze every aspect important for attracting potential investors or knowing whether their company is performing up to the mark or not. Let us know some major types of financial reports below.
- Quarterly or Annual Reports: This report covers all financial growth and processes incurred by the company in a quarter or over a year.
- External Reports: This report is used to cover all external financial information that can help a company analyze whether they are good enough for investment. This report does not cover the financial health of a company but highlights the external factors that affect business health.
- Government Reports: The government financial report analysis is created to enable the public to oversee the actual growth, expenses, sales, and revenue generated by the company. Being a government report, it helps bring out the best by comparing companies in the same category based on the financial data available.
- Financial Notes: This is a note used to explain the assumptions made to prepare financial statements and accounting policies by the company. It helps readers gain important insight into the pathway businesses took to implement the process and policies.
What is Financial Statement Analysis?
A Financial Statement analysis is a set of documentation that presents business financial activities, i,e. sales, returns, investments, revenue, liabilities, assets, and more, during a specific point in time. It helps analyse business financial status at the present time.
This document clarifies what assets are owned by the company, how much earnings they made during the current financial year, liabilities they are currently into, and more. A financial statement is a part of financial report analysis and is often included in the financial report by business analysts or financial analysts. Some common types of financial statements are given below
- Balance Sheet: A balance sheet is a type of financial statement that takes into account a company’s assets and liabilities at a specific time. It is a major document used to analyse the financial health of a business. It estimates the liquidity, debt position, funding, etc of a company.
- Cash flow Statements: This statement maintains a record of all the cash transactions i,e inflow and outflow in business. It represents the cash flow health of a company. This is a major financial statement that evaluates investors’ interest in your company.
- Income Statement: As the name suggests, this financial statement is used to measure revenue, expenses, and profit generated by the company to measure long-term profitability. It can be used to analyze market trends and patterns over time.
Key Takeaways
- All financial statements can be called financial reports, but not all financial reports are financial statements.
- Financial reporting analysis is user-centric and is often conducted by analysts, investors, or creditors to make strategic, informative decisions.
- Financial statement analysis is a more technical way of determining a company’s performance and identifying areas for improvement.
- The level of complexity may vary whereas financial reporting analysis can be more complex due to the wide range of information included.
Difference Financial Reporting And Financial Statement Analysis
Let us dig deep into some of the major differences in financial reporting and financial statement analysis in the table below.
| Feature | Financial Report Analysis | Financial Statement Analysis |
| Scope | Broader scope | Narrow Scope |
| Inclusion | Not all financial reports are financial statements. | All financial statements can be called financial reports, but not all financial reports are financial statements. |
| Sources | It analyzes all financial information about a company. | It focuses on three core financial statements: balance sheet, income statement, and statement of cash flows. |
| Types | External statements, financial notes, annual or quarterly records, government reports | Balance sheet, income statement, cash flow statement |
| Additional Sources | May include MD&A, press releases, and other announcements | May consider notes to the financial statements but it is not primary objective. |
| Purpose | To paint a holistic picture of the company’s financial health, performance, and future prospects | To assess different aspects of a company’s financial health based on the core financial statements |
| Techniques | May include techniques used in financial statement analysis, but also consider broader business context | Employs techniques like ratio analysis and trend analysis to evaluate profitability, liquidity, solvency, and efficiency |
| Relationship | Financial statement analysis forms the foundation for financial reporting analysis | Provides a deeper understanding of the financial data before considering additional information |
| Decision making | Provide data for compliance and reporting purposes | It helps in decision-making and process improvement |
| Compliance | Mandatory for publicly traded companies | Not mandatory but helps in creating strategic, informed decisions. |
Learn Financial Reporting And Financial Statement Analysis with PW Skills
Enroll in our Financial Mastery Analysis and Modeling Program and learn to calculate financial statements, reports, financial models master DCF evaluation, and much more under the guidance of our top experts and advanced tutorials. Become a certified financial analyst with pwskills.com
Financial Reporting and Financial Statement Analysis FAQs
Q1. What is financial reporting analysis?
Ans: Financial reporting analysis is a detailed report used to represent your business's financial strengths. The company uses financial reporting analysis to attract investors and help it grow.
Q2. What is financial statement analysis?
Ans: A Financial Statement analysis is a set of documentation that presents business financial activities, i,e. sales, returns, investments, revenue, liabilities, assets, and more, during a specific point in time.
Q3. Is a financial statement similar to a balance sheet?
Ans: The balance sheet is a statement that is used to depict the financial condition of an enterprise. The balance sheet is used to keep track of a company's assets and liabilities. Similarly, financial statements are also used to determine the financial health of a company by taking into account cash flows, revenue, sales, and other factors.
