INSIDE THE ANNUAL REPORT

INSIDE THE ANNUAL REPORT

Here is what comprises an annual report

• A letter from the chairman on the high points of business in the past year with predictions for the next year.

• The company philosophy – a section that describes the principles and ethics that govern a company's business.
• An extensive report on each section of operations within the company, describing the company's services or the products.
• Financial information that includes the profit and loss (P&L) statements, cash flow statement and a balance sheet. Depending on its income and expenses, the company will either make profits or show losses for the year. The cash flow statement, as the name suggests, reflects where the money came from and how it was utilized. It is an important financial statement as it helps one understand if the company is generating enough money from its operations to fund the costs, or if the company is constantly reliant on external funding like debt or equity. The balance sheet describes assets and liabilities and compares them to the previous year. The footnotes will also give you reveal important information, as they discuss current or pending lawsuits or government regulations that may impact the company operations.
• An auditor's letter in the annual report confirms that the information provided in the report is accurate and has been certified by independent accountants.
• The annual report also includes a section called management’s commentary. In this section, the management explains how the balance sheet and income statements have been prepared, where the funds have come from, and how they have been utilized. This is also an important section as it reflects the management’s mindset and outlook.

• UNDERSTANDING THE BALANCE SHEET

• The balance sheet is one of the most important financial statements of a company. The logic behind producing a balance sheet is to ensure that all of the company’s funds are accounted for, and that financial accounts are always in balance. It is reported to investors at least once a year. You may also receive quarterly, semi-annually or monthly balance sheets. The contents of a balance sheet include what the company owns, what it owes, and the value of the business to its stockholders.
• Let’s look at these three components in detail:
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