Financial data refers to a number of verified, quantifiable sources of information about the financial health, performance, and prospects of an enterprise. Financial data can come in many different forms, both internal and external, and is used to drive both short- and long-term business strategies.
Because of the importance of financial data, both within a company and outside of it, guaranteeing that it is accurate, complete, and up to date is of paramount importance for company financial departments and reporting systems.
There are many types of data points that can be used to describe a business’ financial performance. Some of the primary ones include:
Secondary, or alternative, sources of data may include:
These may not all be strictly quantitative, but can nonetheless help add additional detail to the full picture of a company.
Financial data can be obtained from numerous sources.
The main one is the company itself, which will normally keep detailed financial records and release them publicly, both as needed and required by law, in the form of documents such as earnings reports, income statements, balance sheets, profit and loss statements, debt-to-earnings ratios, and more. These reports are usually published quarterly or annually, but a company may choose how often (and how much) it releases financial performance data.
Publicly traded companies, for example, are obligated to be transparent about all aspects of their financial performance for their shareholders. Privately held companies may not be as forthcoming, but their financial data can still be found through tax or government records.
Despite potentially stiff legal penalties, companies may still attempt to inflate sales and revenues while hiding expenses or other negative factors, to appear more attractive to investors and creditors. That is why it’s important to establish the veracity of financial data through vigorous forensic accounting.
Alternative financial data usually comes from sources outside the company, such as industry analysts, web monitoring tools, and third-party data providers.
Financial data is a critical factor in numerous aspects of a business, influencing everything from internal strategy to investment decisions. It provides a foundation for evaluating and shaping various business activities. The importance of financial data can be seen in several key areas, including internal business strategy, business financing decisions, and identifying investing opportunities.
Companies regularly review their financial performance to assess their current strategy, staffing levels, resources, investments, and future outlook, and adjust their tactics accordingly to either compensate for shortcomings or take advantage of growth opportunities.
Financial institutions rely on a company’s financial data, both current and historical, when evaluating applications for loans and lines of credit, and deciding whether or not to approve a potential borrower.
Companies that want to attract investors or raise capital need financial data that demonstrates steady growth, reliable long-term performance, and positive future trends.
