An annual report is a detailed report showing how a company has performed throughout the preceding year. It is intended to provide information about the company's business activities and financial performance to concerned stakeholders including shareholders, borrowers, investors or any other interested party. It may be considered as grey literature (material information or research provided by the organizations which are lying outside the companyâs channel of publication). Almost every country requires companies to prepare as well as disclose annual reports with many jurisdictions requiring the report to be filed at the company's registry. Companies listed on a stock exchange are required to publish its annual report more frequently. Few components of Annual Report:
- Letter from the Chairman: In this part of the report, the chairman addresses how the company has performed during the year and throws light on the companyâs goals and strategies for the future. A glimpse of EBIT/EBITDA, revenue, expenditure, dividend pay-out, profit/loss, balance sheet position and income statement results is present here.
- Ten-year financial summary: This section depicts the companyâs financial results over the last decade.
- Management discussion and analysis (MD&A): Under this section, the management discusses the financial trends of the company over the past couple of years, particularly recent fiscal year. It gives the readers a hint that where the company stands and where is it expected to go. Details such as product launches, geographical expansion, mergers and acquisitions, regulatory approvals, demergers and organizational changes are often talked in this segment.
- General shareholdersâ information and corporate governance: This segment shows the information regarding the significant shareholders along with the corporate governance actions taken by the company.
- Financial statements and schedules: This section includes the financial performance data of the company such as Profit and Loss statement, Balance Sheet, Cash flow, Other comprehensive income, etc. The financial statements are usually compiled in accordance with the IFRS and/or the domestic GAAP, as well as local legislation (e.g., the SOX in the U.S.).
- Other information such as a report on operations for manufacturing firms relevant to stakeholders may be included. In the case of a big company, the report published is usually a sleek, colourful, and high-gloss.
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