An annual report is a comprehensive document companies issue to shareholders that details financial performance over the prior fiscal year. Annual reports contain audited financial statements, details about operations and products, executive letters, and information about goals. They help shareholders evaluate the business and make investment decisions.
Preparation and Responsibility
To prepare thorough yet readable reports, companies often use in-house teams or hire outside accounting, writing, and design professionals. An effective annual report structures financial data and company details clearly without excessive length or jargon. It balances successes and setbacks transparently while spotlighting productive strategies. By providing crucial information accessibly, a strong annual report fosters shareholder trust and informed investment.
Legal Requirements and Auditing
Public companies are required by law to publish an annual report. Universities, government bodies, and non-profit organizations also produce annual reports. Most feature photos and financial reports illustrating the nonprofit’s revenue and expenses and acknowledge contributors.
- A 10-K is a comprehensive report filed annually by public companies about their financial performance.
- 10Q reports are quarterly and include unaudited statements.
Report Structure and Contents
The annual report has a few sections that must convey certain information:
- Letter to the shareholders
- Business and industry description
- Audited financial statements:
- Balance sheet
- Income statement
- Statement of cash flows
- Notes explaining certain facts and figures
While publicly traded corporations often use in-house personnel, many farm out the reports. The focus is on smaller companies, LLCs, and nonprofits. Key things to avoid include leaving preparation to the last minute, masking business challenges, and overloading with excessive details and jargon.
Broader Reading Audience
While intended for shareholders and investors, the reports are also read by lenders, banks, potential employees, and MBA students. They are full of facts, figures and detailed accounting notes, making them hard going.
Nonprofits and Private Companies
Businesses not publicly traded can still prepare a report for private investors who need information on performance or are securing private funding. A nonprofit annual report highlights successes, provides fulfillment for hardworking staff, and shows donors their money is put to great use. It also makes an appeal for more donations, paid staff, volunteers, and bigger donations for the coming year. To summarize, focus on key figures or create visual representations of expenses, revenue, goals met, and growth.