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What Is Financial Data? - Definition & Concept

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  • 0:00 Definition of Financial Data
  • 0:29 Types of Financial…
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Lesson Transcript
Instructor: Shawn Grimsley
Financial data provides the fundamental building blocks for sound business analysis. In this lesson, you'll learn about some of the primary types of financial data used by managers, investors, and regulators in analyzing a company. A short quiz follows the lesson.

Definition of Financial Data

Financial data consists of pieces or sets of information related to the financial health of a business. The pieces of data are used by internal management to analyze business performance and determine whether tactics and strategies must be altered.

People and organizations outside a business will also use financial data reported by the business to judge its credit worthiness, decide whether to invest in the business, and determine whether the business is complying with government regulations.

Types of Financial Data and Uses

Let's look at some of the key types of financial data that are of the most importance to internal management and outside stakeholders.

Assets include everything that a business owns and includes all personal property, real property, and intangible and tangible property. Real property is real estate and anything that is attached to it. Personal property is any property that is not real property. Tangible property is any physical property, such as equipment, furniture, tools, or inventory. Intangible property is non-physical property, such as a patent or goodwill. The total value of a company's assets is reported on the company's balance sheet.

Liabilities are the financial obligations of a company, such as what the company owes to others. Liabilities can include such things as debt, which is money owed to a lender along with any interest. Liabilities can also include accounts payable, which is money owed to suppliers for goods and services bought by the company. They also include other obligations such as wages, benefits, and taxes. Liabilities can be short-term, which means the obligation will come due within a year, or long-term, where the liability will come due in a year or longer. Liabilities are reported on the company's balance sheet.

Equity is the value of the company left over after the company has paid all of its liabilities out of all of its assets. Equity belongs to the owners of the company. Sometimes, however, there is no equity because the value of the liabilities exceeds the value of the assets.

Important data related to equity includes the number of outstanding shares and the classes of shares. A share is a unit of ownership. Sometimes there are different types of ownership interests. Common stock, for example, is an ownership unit that has the right to vote. Preferred stock, on the other hand, generally do not have voting rights, but do often have the right to receive dividends or income distributions before common stock and often are entitled to have equity paid back before common stockholders if the company is liquidated.

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