Annual reports

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Preparing An Annual Report

Published January 8, 2014 by Mayrbear's Lair

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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.

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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.

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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.

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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.

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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.

References:

Fraser, L., & Ormiston, A. (2010). Understanding financial statements. Pearson Education.

Financial Statements

Published November 15, 2013 by Mayrbear's Lair

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Financial statements contain an enormous amount of valuable information with respect to a company’s financial position, the success of their operations and provides a clear insight of their future potential. They help investors make effective decisions because they answer such questions as: (a) would an investment yield an attractive return; (b) what is the level of risk they pose; (c) should existing inventory be liquidated, and (d) are cash flows sufficient to support the firm’s borrowing needs. For example, because of changes in the economy as well as advances in technology in how music products are now marketed and sold, someone looking to invest in a record company like the one I used to work at, Capitol-EMI Records (CER), would look to the financial statements of their annual report to help them determine how well the company is performing.

In it’s hey day, CER was considered a prestigious primary market record label that is still recognized worldwide today. It is part of the EMI Music Group and is a subsidiary of the Universal Music Group. The company was founded in 1942 by American lyricist, songwriter, and recording artist Johnny Mercer, who wrote the famous lyrics to Henry Mancini’s Moon River that later went on to become the trademark song for singer Andy Williams  (The Johnny Mercer Research Guide, 2012). Throughout the years, CER has consisted of an impressive artist roster including such mega stars of the past like The Beatles, Kenny Rogers, David Bowie, Tina Turner, Bob Seger, as well as the giants of today like Katy Perry and Coldplay. In the global marketplace, CER distributes a wide genre of music including, pop, rock, classical, jazz, R&B, and hip-hop through various sister labels. With offices around the globe, the Capitol Records Tower in Hollywood, California is their most famous landmark.

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Investors that are looking to figure out how well the company is performing today would seek answers from the company’s annual report. Friedlob and Welton (2008) explain that the key to comprehending any annual report is understanding that they are developed to help satisfy the many needs of a variety of different people including shareholders, creditors, potential shareholders and creditors, as well as economists, financial analysts, and suppliers  (Friedlob & Welton, 2008).

EMI’s Annual Report provides information that discloses how well the company is performing, their financial condition, and where the company is headed. Fraser and Ormiston (2010) purport that segmenting the financial information helps direct individuals to the data that is relevant to them (Fraser & Ormiston, 2010). For example, a creditor may want to peruse the cash flow statements to gain insight into the company’s liquidity. The Consolidated Financial Statements however, would be useful to investors because they provide details on all the company’s financial branches that reveal the true nature of their net worth. Any person therefore, looking to invest in the Capitol-EMI family, would need to take into consideration the information provided from these consolidated statements. They are important documents that will help investors decipher how well all of the company’s affiliates are performing to give them a clearer a picture of its net worth.

References:

(2011). EMI annual review 2009/2010. Finances. Hollywood: Maltby Capital Ltd.

The Johnny Mercer Research Guide. (2012). Retrieved October 30, 2013, from The Johnny Mercer Foundation: http://www.johnnymercerfoundation.org/initiatives-charities/for-researchers/johnny-mercer-research-guide/

Fraser, L., & Ormiston, A. (2010). Understanding financial statements. Pearson Education.

Friedlob, G., & Welton, R. (2008). Keys to reading annual report. Hauppauge, NY: Barron’s Educational Series.