When a corporation’s staff of accountants finish preparing the financial statements for the fiscal year the next order of business is to call a meeting with the company’s CEO, as well as the Director of Investor Relations and representatives from the marketing and art departments to design that current year’s annual report. Based on the research I conducted in my financial analysis course, this post will provide information on how I would present the main ideas I believe a company should present to shareholders in the annual report.
To begin with, it is important that the company’s annual report provide investors and division heads with knowledge about the company’s weaknesses while offering shareholders security about the company’s strengths and future growth forecasts. These are important components that will help paint a full transparent picture of the firm. In preparation of the company’s Annual Report the following information consists of the main ideas that should be included in the documentation, in addition to the traditional financial statements that provide an overview of the firm’s financial condition.
First and foremost, the Chairman’s statement should include their pride in the company’s achievements. For example, a company that holds the title as the third largest retailer of recreational products in the US should state that clearly as well as their many other strengths, such as a favorable economic and industrial outlook. In addition, the report should also include others strengths, for instance their geographical position may produce more favorable results. A company that sells ski equipment, for example, located in Colorado is in a better position geographically than one located in the Florida region. These kinds of factors can be included to illustrate how the geographic location helps reduce competition and is a beneficial component for economic and industral growth.
The financial report should also reveal the company’s policies and a view of the operational, financing, and equity activities. In addition, it should include details about the firm’s marketing tactics and objectives, expansion strategies, and illustrate their efficiency in the management of their accounts receivables and inventory divisions or any other components that have been proven quite effective. Another important component that should be considered is the company’s control of the operating costs, and how successful their use of financial leverage and solid coverage of debt service requirements were. Furthermore, the report should reflect the firm’s continual growth or plans for implementing substantial sales growth with profitability levels as well as results and new strategies that focus on the company’s expansion process. These are significant components that can help confirm a firm’s strengths and weaknesses that supports how well a company performed during that fiscal year.
The report’s commitments and contingencies section should also disclose the risks, noting the significant one(s) the company faces, for example like an economic vulnerability from unfavorable weather conditions which may increase a firm’s debt financing. In conclusion, on the whole, the report will reflect that the outlook for company stating how well or poorly they did with strategies and plans for the future that will put the firm in a better position that will ensure investors and staff alike, that the firm is a secure company to invest in and includes corporate governance policies to support the artistic and marketing divisions guided by the effective leadership skills of the company’s CEO.
Fraser, L., & Ormiston, A. (2010). Understanding financial statements. Pearson Education.