An annual report summarizes a company’s financial performance and activities over the prior year. Public companies must file these reports, while private companies don’t have obligations to submit annual reports. These reports are critical for shareholders to evaluate the business and make investment decisions.
The annual report begins with a letter to the shareholders, followed by audited financial statements: balance sheet, income statement, and statement of cash flows. Most public companies hire auditing companies to write their reports, but in-house teams or various professionals can also be involved to prepare thorough and comprehensible reports.
An effective annual report presents financial data and company information clearly, balancing successes and setbacks while spotlighting productive strategies.
While intended for shareholders and investors, annual reports are also read by lenders, banks, potential employees, and business students. An annual report provides crucial financial and operational information for these stakeholders. For non-profits, it acknowledges contributors and highlights the philanthropic efforts, successes, and future goals.
Public companies are required by law to publish an annual report. These reports must convey certain information, including audited financial statements. External auditors are critical in the annual reporting process, providing assurance and validation of the financial information. The board of directors oversees the preparation and ensures the report’s accuracy and compliance with legal requirements.
Non-public entities also benefit from preparing annual reports whether for private investors or as part of securing private funding, and non-profits use these reports to show donors the impact of their contributions and to appeal for future support.
- Chairman’s letter
- Financial statements:
- Balance sheet
- Income statement
- Cash flow statement
- Goals and achievements
- Notes to the financial statements
In summary, a strong annual report is informative, accessible, and fosters trust among stakeholders.