An annual report is exactly what it sounds like - a formal report on a company's performance in the preceding year. A public company produces an annual report for its Shareholders, the people and institutions that own the company.

Other interested parties, such as customers, vendors and potential investors, read this report, too. In fact, the Securities and Exchange Commission (SEC), a U.S. government agency, or internationally, your local stock exchanges, require a public company to keep Shareholders informed on the state of its business.

An annual report is one of the most important documents a company produces and is often the first document someone consults when researching a company. It reports how the company did financially and often explains the scope of its business mission and management philosophy.

For these reasons companies take the development of an annual report seriously. They carefully consider its design and construction and even the paper to print it on. Today, many companies also produce Web and CD-ROM versions of their annual reports but it is best to get the printed copy from the company's corporate office or the local stock exchange in your country. You can link to many resource for ordering annual reports for companies around the world from the Kirby Arnold Data Gathering page.

ELEMENTS OF AN ANNUAL REPORT

• Financial highlights. Probably the most often-read section of any annual report, these highlights give a quick summary of a company's performance. The numbers appear in a short table, usually accompanied by supporting graphs.
• Letter to Shareholders. This letter may be from the chairperson of the board of directors, the chief executive officer, or both. It can provide an analysis and a play-by-play review of the year's events, including any problems, issues, and successes the company had. It usually reflects the business philosophy and management style of the company's executives, and often it lays out the company's direction for the next year.
• Corporate message. Some analysts, business executives, and Shareholders consider this message an advertisement for the company; others find it useful. However, it almost always reflects how a company sees itself, or how it would like others to see it. The company can explain itself to Shareholders, using photographs, illustrations, and text. This message may cover the company's lines of business, markets, mission, management philosophy, corporate culture, and strategic direction.
• Management discussion. This series of short, detailed reports discusses and analyzes the company's performance. It covers results of operations, and the adequacy of liquid and capital resources to fund operations. Important financial issues are referenced, and often the company's key ratios are given. Frequently, the company's segments are reported and their performance discussed.
• Financial statements and notes. These statements provide the raw numbers for the company's financial performance and recent financial history. The SEC requires three statements - statement of earnings (the income statement), statement of financial position (the balance sheet), and statement of cash flows - all covered in this Primer. (The statement of Shareholders' equity is not addressed here.) These statements include a comprehensive set of related notes that provide explanations, additional detail, and supplementary financial information.
• Selected financial data. This information summarizes a company's financial condition and performance over five years or longer. Data for making comparisons over time may include revenue or turnover (sales), gross profit, net earnings (net income), earnings per share, dividends per share, financial ratios such as return on equity, number of shares outstanding, and the market price per share.
• Board of directors and management. This list gives the names and position titles of the company's board of directors and top management team. Sometimes companies include photographs. This information is often in the back of the annual report.
• Shareholder information. This information covers the basics of the company's corporate office headquarters, the exchanges on which the company trades its stock, the location and time of the next annual Shareholder's meeting, and other general Shareholder service information. Shareholder information is usually in the back of the annual report.
• Auditors' report. This summary of the findings of an independent firm of certified public accountants shows whether the financial statements are complete, reasonable, and prepared consistent with generally accepted accounting principles (GAAP) at a set time.
• Report of management. This letter, usually from the board chairperson and the chief financial officer, takes responsibility for the validity of the financial information in the annual report, and states that the report complies with SEC and other legal requirements. The discussion attests to the presence of internal accounting control systems that cover effectiveness of operations, reliability of financial reporting, and compliance with federal laws.

Call 925.631.1198 or email us today