What does the term 'variance report' refer to in financial analysis?

The term 'variance report' in financial analysis specifically refers to a comparison of projected versus actual results. This type of report is fundamental for businesses to assess how well they are adhering to their budgets or forecasts. By analyzing variances—where actual performances deviate from planned outcomes—organizations can identify areas of overperformance or underperformance. This insight allows managers to make informed decisions regarding resource allocation, cost control, and strategic planning.

Additionally, variance reports can highlight trends over time, making it easier for businesses to adjust their future forecasts based on observed discrepancies. This practice helps to foster a more agile response to changing market conditions and operational efficiencies, ultimately aiding in achieving financial objectives.