Annual Report
Annual
report is the document which is mandatory to be published by a company which
basically includes:
|
Speech of Chairman |
Profit and Loss Account |
|
Director’s Report |
Schedules |
|
Auditor’s Report |
Cash flow Statement |
|
Balance Sheet |
Corporate Governance |
To
know about the surviving, growing or decline, on what stage a company is on can
be know by the annual reports majorly. If on the point of view of an
organization is looked, then annual reports are the great source to persuade
more the potential investors and keep happy the existing one.
Basic points about Annual
report
- It
is a document which is presented basically for shareholders in which the
company financial position as compared to previous years is shown.
- When
the stock market crash happened at the time of 1929, annual report was started
get published regularly
- Not
only the shares and securities, it is published for the mutual funds which
are basically registered.
Why annual report of a company
is so important:
1.
It’s
a comprehensive study of achievements of a business:
Through annual report one may know about the exact business growth and progress
of the organization
2.
A
comparison of current year from proceeding year can be known: a comparison between the preceding and current
year of profits and balance sheet.
3.
Vision
and Mission for the new potential investors:
Knowing about the where the company
actually is and where it is planning to be in the future is quite important to
know for the new investors who are taking interest in investing in it.
4.
Marketing
tool: As we have already discussed that annual
report gives the bio data of a company to invite new investors which means it
act as an advertising tool for the corporation to invite investors through annual
report.
5.
Basic
and subsidiary activities of organization can be known: The
main business in which organization is organized, what kind of structure it
follows and about promoters, directors and such kind of other things can be
known from annual report by the potential investor.
6.
Ethical
standards can be assumed of a business: After
knowing about structure of the organization, the person may somehow judge about
the ethical standards which could be following in the organization. For
example, if there is strict regulations then that may be assumed the standards
are followed strictly too.
7.
Future
potential and targets of the organization: It
basically means the mentioned vision in the annual report and the potential
which can be analyzed through the comparison of profits from last year.
Where the annual report can be
found out?
Three
basic ways to find the annual report:
1.
Companies’
Websites : the most common and easiest way to find an annual
report of a company is its website as
the site to fetch the annual report of
TCS , https://on.tcs.com/Annual-Report-2021
2.
Stock
exchanges’ sites: Most of the companies and their securities
which annual report to be fetched out are listed on stock exchanges, thus
annual report can be downloaded from there too, like https://www.bseindia.com/investor_relations/annualreport.html
3. Other websites:
https://www.annualreports.com/
and also https://www.screener.in/(screener
site can also be used.
What is basically hunted by the
investors in annual report?
This is what basically hunted by the investors
through annual report:
1.
Net
Sales: the most common thing which is assessed
through annual report is net sales which are the difference of sales and sales
return.
2.
Net
Income: It is calculated by: Income – Expenses and is
important to know to know about the revenue generated by the company.
3.
Sales
Growth: Through annual report, sales pattern
comparison from last few years to current year is estimated.
4. Financial statements: It includes profit and loss
account, Balance sheet which is analyzed through annual report.
5.
Notes to
accounts: These are given under different schedule which gives the details about
the items mentioned in profit & loss account and balance sheet and how
those items were calculated is known.
6.
Report on Corporate
governance: Corporate governance means the set of rules which is framed to control a
corporation to protect the interests of the stakeholders; this report is also
mentioned in annual report.
7.
Director’s report: It is basically about what
the new decision has been taken in annual general meeting.
8.
Membership: It tells about promoters, directors, members,
shareholders and their share holding and other stakeholders.
9.
Information
on shares of the company: How many shares are being issued
at what price and their market price is known.
10.
Auditors
report: As the financial statements are being audited by the auditors and their report
is also mentioned in annual report to check the truthfulness of the report.
Is company’s annual report trust-able?
Or
Can we know about the faults of company in annual
report?
Corporate
annual reports to a great extent are trustworthy. They provide 99% accurate
information as per the companies’ situations and their financial statements mentioned
in the annual report are the accurate.
These reports are audited by the auditors who
are completely separate from accounting firm and not associated with the
company in any way, and most of which are knowledgeable and are very well recognized
for these types for audits. They are very closely checked these days.
But still there is 1% chance of fraud or hiding
of losses or any kind of misinformation such as forgery. Thus, it is better, if
one has a better knowledge of finance, accounts and he or she is able to
interpret the provided information in the particular way to fetch the important
results. Because otherwise it will be difficult
to analyze or instead they can take the help of expert and their advice which
may provide the solutions for the problem if there is one. as sometimes annual reports generally conceal more than reveal.
Advantages and Disadvantages of
annual report
---Advantages:
1. Annual
reports include financial statements which are the essence of a company and the
most important and crucial to know about the performance of the company.
2. Annual
company reports may reveal that if a company is doing better as compared to the
previous years or not.
---Disadvantages:
1.
One is interested in checking the effectiveness of the
corporation to check the ratios and analysis done on them but it is true that
one can find the ratios in annual report but it is totally depend on him
whether he or she has the good analysis skills or not mere good ratios not
justify the performance of the corporation because companies will highlight
only those ratios that show growth or better performance.
2.
It is imperative to keep in mind that the annual report is
only published once a year. The data may be old or not effective to tell about
the performance of the corporation in between the year.
Conclusion
The
annual report is the most important and common way to judge the financial
performance of a corporation by interpreting the financial statements provided
in the annual report. But as we already discuss there is 1% chance of forgery
in annual report because financial statements are audited by an auditor who has
not at all related to the company and provide the mistake free reports still
one must have the basic understanding of these terms and know how to interpret
the annual report and that set of mind so that 1% chance of misinformation can be
eliminated but annual reports can be produced to the company’s favor at per
that chance.
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