Annual reports are essential if the company is a corporation or a limited liability company with members. Even when it is a sole proprietorship or a single business corporation, preparing an annual report is significant. In cases where financial assistance is required or when hiring professional services, a copy of the annual report can be asked.
The first part of annual reports gives a chance for the CEO of the or the chairman of the board to express the effects of the year's events affected the company both positively and negatively. The CEO also talks of the company’s plans for the next financial year. The section outlines the benchmarks met, new contracts and the expected returns to the company, challenges faced and solved, the changes in company strategies and management positions. The essence of reporting vital events of the recent year clarifies the intended plans that were forgotten, errors in judgment, and brings new insights for improvements.
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The following section (future goals) covers a thorough discussion of the plans for the next financial year. However, the company’s secret strategies are not revealed but instead, the ways of building on the previous year's merits are discussed. Finally, if the year was not successful, the application of the lessons learned is discussed. Investors, board members, or stakeholders are primarily interested in this section (Ball, 2011). Therefore, any questions concerning the future of the business are covered.
The following section covers the lists of board members, leading stockholders, key employees, and ownership interests of the listed members in the company. Suppose any changes happened during the financial year and those predicted to be faced in the oncoming financial year. It is mainly referred to as the current management and can be a simple table containing specific details.
Large companies with many investors present the audited end-year financials in this section, commonly referred to as the section of the financial results. However, audits are expensive and tie consuming, and companies prefer not to use them. If the financials are straightforward and without many subsidiaries, retail stores, or branches, audits are not used. The fiscal report should be detailed and have an income statement, sales report, balance sheet, and cash flow statement. Discussions of the sales report and income statement help the people reading reports to understand the significance of the earlier meetings of the previous year's performance and plans affect the company's financials.
Data Clarity
The business section has data containing the full description of the companies and the subsidiaries. It shows how the company is legally structured, the sources of revenue, and plans the companies have in the future. This information includes detailed discussions of the companies' happenings during the previous financial year. For example, the list of all assets bought or sold, lawsuits, or legal changes like patents, necessary contracts, or trademarks. It also contains information concerning any votes brought to the shareholders. The data is relevant for shareholders to make conclusions and predict future performances.
The value of stock, the amounts authorized and issued, the names of the principal owners, and how much they own. The disclosed details of stock that have changed hands and the details of transactions are provided in the annual reports (Richards & Staden, 2015). The stock exchange market requires companies to be updated, and shareholders base on this information to know the companies' stock value. The company's financial condition, including debts and shareholders' ownership, helps the stakeholders know if there are significant reasons to continue investing. The financial statements like cash flow, balance sheet, and income statement depict the companies' net profits. The information necessary for legal compliance shows the shareholders that the business in compliance with the law. This is to ensure every company follows the same rules and market roles effectively.
The cash flow statements are important because it shows the amount of cash available to meet the short-term goals, invest in the companies, and pay the dividends of shareholders. In addition, the enormous data is broken down by financial ratios, which have insight into the company's performance. For instance, the Return on equity ratio is used by investors or shareholders in calculating the companies' potential to get finances from the shareholders' input.
Goals, Challenges, and Plans Focused in Annual Reports
The companies' customers use the reports to decide the essence of building relationships. Companies usually look to have a good relationship with consumers of the goods and services. Most clients are interested in working with suppliers of high quality, which enables companies to prioritize their objectives. Customer relations and good reputations are determinants of sales volume, especially when the market in place is saturated.
Most managers tend to focus on financial management as a vital determinant of the entities' success. Regulations and compliance with the law and ensuring the terms of operation lie within the government statutes challenge companies. Another challenge is ensuring employee competence and recruiting the right talents to build company culture around the employees. The majority of the HR managers advise doing everything to retain top employees. Embracing and deploying technology is usually a challenge to many companies. Therefore, managers focus on recruiting the most effective and easily adaptable technologies. The technology employed should be productive and enhance speed in task completion. Marketing techniques and the sources of capital are primary since they constitute the main aim of conducting the business. Top managers today insist on integrity as a factor to keep employees.
Formats
Hardcopy annual reports have been the most commonly used, but electronic versions are increasingly taking over. Most of the information is accessible over the internet and accessible to many people and in various formats. In addition, these modern structures facilitate easy presentation.
References
Ball, M. (2011, April 14). Images, language, and numbers in company reports: a study of documents that are occasioned by a legal requirement for financial disclosure. Qualitative Research, 11 (2), 115-139. https://doi.org/10.1177%2F1468794110394063
Richards, G., & Staden, C. v. (2015, August 3). The Readability Impact of International Financial Reporting Standards. Pacific Accounting Review, 27 (3), 282-303. https://doi.org/10.1108/PAR-08-2013-0086
