Chapter 14 Discussion Annual report 1

The three key aspects of a typical annual report from a large corporation are Chairman’s Letter, Management’s Analysis and Financial Statements. Chairman’s Letter is generally the first part of an annual report. it will set the tone, establish a theme, and most importantly summarize the report for the readers. The letter will highlight the company’s accomplishments for the year, as well as the company’s failures. The letter will state what led to the company’s successes and will also address how it dealt with its failures or issues. Management’s Analysis is a section of the annual report that discusses different aspects of the business. Topics of discussion typically include new hires or appointments, new product introductions, updates on the progress of business acquisitions, product launches and other information management believes to be important to investors. It is an overview of the previous year's developments and how the company performed over that period. It should be a good starting point for a new investor who wants to understand a business' fundamentals. Financial Statements comprise the meat of the annual report. This is where the company provides the numbers that investors use to determine how well the company performed financially. The financial statements consist of the income or profit and loss statement, balance sheet and cash flow statement for the previous year and prior years so investors can compare the performance from one year to the next. Publicly traded companies are required to provide three years’ worth of financial statements in their annual reports. A privately held company is not bound by the same regulations. However, investors will always welcome greater transparency. A privately held business that goes above and beyond to publish prior-year financial results in its annual report increases its chances of attracting new money.