What does a variance report show?

A variance report is a key tool in financial management used to analyze the differences between actual financial performance and budgeted amounts. The core purpose of a variance report is to provide insights into how well a business is aligning with its financial goals and budgets, highlighting areas of overperformance or underperformance.

When financial leaders compare actual results with budgeted figures, they can identify variances. These variances can be favorable (actual performance exceeding budget) or unfavorable (actual performance falling short of budget). Understanding these differences allows companies to make informed decisions regarding operational adjustments, resource allocation, and strategic planning.

Other options, while related to financial reporting, do not accurately reflect the purpose of a variance report. For example, the first option refers specifically to sales, which is too narrow a focus for a variance report that encompasses all financial performance metrics. The option regarding the amount of debt pertains to balance sheet analysis rather than variance, and the changes in asset values over time relate to asset management rather than the comparative financial performance captured in a variance report.