Annual Report

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What is an Annual Report?

An annual report is a formal document that public corporations create to tell the story of their business operations and financial situation. It can be used by shareholders, employees, and even customers to make decisions about whether or not to do business with a company. These reports contain several pieces of pertinent information about a business’s story, financial conditions, and future goals.

Public corporations are required to create and publish accurate annual reports by the Securities Exchange Commission. This is because they have a financial, or fiduciary duty, to do what’s best for their shareholders and employees.

What’s Included in an Annual Report?

An annual report includes vital information about public corporations. This document plays a key role in lifting the corporate veil that conceals business operations from the general public. Corporate lawyers help public corporations to construct annual reports to ensure they completely accurate.

Readability is another important aspect of a successful annual report. Companies want to encourage interested parties to read the entire document. To accomplish this, companies make sure to include plenty of graphics and pictures throughout the report, which makes it easier to read.

An annual report consists of several key pieces of information about a company’s operations.

Letter from the CEO or President

Annual reports start with a letter from the CEO or president of a corporation. This letter is addressed to the shareholders of the company since they are the main ones that read the report. Since a successful annual report letter sets corporations apart from their competitors, it’s important that executives spend plenty of thoughtful time constructing it.

This letter highlights a few major pieces of information, including:

  • Highlights of business achievements over the past year
  • Information about performance goals
  • A brief overview of financial and operational conditions

Information about Financial Conditions

An annual report is a key piece of documentation that shareholders use to determine where to invest their money. Because of this, it’s important for companies to detail their financial conditions within the report. Here are some examples of financial conditions that an annual reports highlight:

  • Balance sheets
  • Income statements
  • Cash flow statements
  • Loan details

This portion of an annual report often contains plenty of charts and graphs. This helps contribute to making the report easier to read and understand.

Overview of Future Business Goals

A key objective that companies have when publishing annual reports is to attract investors and customers. One effective way they accomplish this is by detailing future business goals in their report. This explains to the public the company’s plan to expand and grow.

Here are a few examples of business goals that might be outlined in an annual report:

  • Plans for company expansion
  • Business strategies to grow cash flow
  • How a company will apply strategies to achieve their desired growth
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Special Achievements

Corporate officers are offered a great tool to share company achievements through their annual report. The special achievements section of an annual report is helpful in making sure that current investors are satisfied with their investment. It also aims to encourage new investors to come on board with the company. Companies can decide which achievements to include by taking notes during a meeting, called meeting minutes , and ranking them by importance.

Here are some examples of special achievements that might be included in an annual report:

  • Awards received (by company or employees)
  • Goals reached
  • Success of any special initiatives

Learn more about the key aspects of an annual report here .

How to Find Annual Reports

Annual reports provide vital financial and operational information to people with a financial interest in a company. When an investor or customer wants to find a company’s annual report, they can often locate it in a few different places.

Websites

The web is a great place to get easy access to annual reports. They provide for instant access of current and previous reports. Annual reports can be easily downloaded for future reference from these websites, as well.

Here are a few examples of where annual reports can be found online:

Company Websites

The reporting is most commonly found on portions of company websites that are dedicated to investors. This is because the reporting is most often to determine whether to invest in a public corporation. Company websites provide the perfect space to share this information with the public.

Financial Websites

There are a number of websites dedicated to providing companies’ financial information to the public. These websites are helpful because they often index several years of annual reports. Having access to previous years’ reports gives a more complete financial picture of a company, which helps to further pierce the corporate shield.

Search Engine

The best way to use search engines to find annual reports is to search for the company’s name followed by annual report. This web search should return a direct link to the company’s annual report either on their website or at some other public domain.

Learn more about where to find annual reports here .

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Who Reads Annual Reports?

Annual reports are corporate documents that make private company information available to the public. They tell the company story and include details such as financial conditions and initiatives. Access to private information helps interested parties make important decisions, such as whether to invest or to do business with a corporation.

Annual reports are read by a few different entities for unique reasons:

  • Investors and potential investors – to help investors weigh the risk of their investments
  • Employees – since workers are often shareholders, annual reports provide insight into the financial aspect of issued shares
  • Current or potential customers – to decide whether to support a company
  • Suppliers – to determine if a partnership would be beneficial
  • Lenders and banks – to gauge a company’s ability to repay a loan
  • Students – to learn about the industry

For more details on who reads annual reports, check out this article .

What Happens if a Company Doesn’t File an Annual Report?

After the stock market crash of 1929, United States lawmakers made filing an annual report a requirement for all public companies in the U.S. This initiative was set into motion to allow the American people the opportunity to fully review a company’s financial standing before becoming involved monetarily with them.

If a company doesn’t file an annual report, there are a few consequences:

  1. Less investors : annual reports are needed for investors to gauge their risk
  2. Late penalties : when a report isn’t filed in a timely manner, monetary penalties apply
  3. Dissolution : the state has the jurisdiction to put a company out of business if no annual report is filed within a certain timeframe

For a more in-depth look at what happens when a company doesn’t file an annual report, read this article .

Get Help with an Annual Report

Is your corporation in need of some expert guidance on how to put together an annual report? Post your project today on ContractsCounsel to get connected with corporate lawyers who focus on annual reports and can bring you through the entire process down to the signing authority.

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