Financial modelling terms explained

Financial Reporting

Financial reporting is the process of collecting and reporting financial information about a company. This involves collecting information about the company's revenues, expenses, assets, liabilities, and equity, then organizing this data into a report that answers the questions: How much money did the business make? And what is its financial position?

What Is Financial Reporting?

Financial reporting is the process of communicating financial information about a company to interested parties. This information includes the company's financial position, performance, and cash flow. Financial reports are used by investors, creditors, and other stakeholders to make informed decisions about the company. Financial reporting is governed by accounting standards, which specify the types of information that must be included in financial reports and how that information must be presented.

Who Uses Financial Reporting?

Financial reporting is used by a variety of users in the financial world. Management, investors, lenders, and other stakeholders use the information in financial reports to make decisions about the company. Financial statements provide a snapshot of a company's financial health and performance. Managers use financial statements to make strategic decisions about the company's future. Investors use financial statements to make decisions about whether to invest in a company and what price to pay for shares. Lenders use financial statements to decide whether to provide financing to a company and at what interest rate.

What Are the Different Types of Financial Reporting?

There are three main types of financial reporting: statutory, management, and investor. Statutory reporting is required by law and includes financial statements that are audited by an independent accounting firm. Management reporting is created for internal use by management and may not be audited. Investor reporting is created for external use by investors and includes financial statements, regulatory filings, and other information that may be relevant to investors.


A Monte Carlo simulation is a mathematical technique used to calculate the probability of different outcomes in a financial model. The technique uses a random number generator to create a series of random numbers, which are then used to calculate the probability of different outcomes. This process is repeated many times, to generate a distribution of possible outcomes. This distribution can be used to inform decision making in a financial model.

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