Inside Annual report

Annual Report

 

Annual Report

Annual report is the document which is mandatorily to be published by a company which basically includes:

1.      Speech of Chairman	5.       Profit and Loss Account
2.      Director’s Report	6.       Schedules
3.      Auditor’s Report	7.       Cash flow Statement
4.      Balance Sheet	8.       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 trustable?

                             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 recognised 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.