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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
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 .
Image via Pexels by Negative Space
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:
- Less investors : annual reports are needed for investors to gauge their risk
- Late penalties : when a report isn’t filed in a timely manner, monetary penalties apply
- 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.
Meet some of our Annual Report Lawyers
Jeremiah C.
Creative, results driven business & technology executive with 24 years of experience (15+ as a business/corporate lawyer). A problem solver with a passion for business, technology, and law. I bring a thorough understanding of the intersection of the law and business needs to any endeavor, having founded multiple startups myself with successful exits. I provide professional business and legal consulting. Throughout my career I've represented a number large corporations (including some of the top Fortune 500 companies) but the vast majority of my clients these days are startups and small businesses. Having represented hundreds of successful crowdfunded startups, I'm one of the most well known attorneys for startups seeking CF funds. I hold a Juris Doctor degree with a focus on Business/Corporate Law, a Master of Business Administration degree in Entrepreneurship, A Master of Education degree and dual Bachelor of Science degrees. I look forward to working with any parties that have a need for my skill sets.
Jane C.
Skilled in the details of complex corporate transactions, I have 15 years experience working with entrepreneurs and businesses to plan and grow for the future. Clients trust me because of the practical guided advice I provide. No deal is too small or complex for me to handle.
Jarrett S.
I work with early stage startups (in Georgia and internationally) with their formation, contract, patent and investment needs.
Melissa L.
Seasoned negotiator, mediator, and attorney providing premier legal advice, services, and representation with backgrounds in the following but not limited to law areas: business/commercial (restaurant & manufacturing), contracts, education, employment, family and matrimonial, healthcare, real estate, and probate & wills/trusts
October 26, 2020
Benjamin M.
Experienced Attorney focused on transactional law, payments processing, banking and finance law, and working with fintech companies with a demonstrated history of driving successful negotiations in technology sourcing and transactions and strong understanding of government contracts and the procurement process
October 27, 2020
Ross F.
I am an experienced technology contracts counsel that has worked with companies that are one-person startups, publicly-traded international corporations, and every size in between. I believe legal counsel should act as a seatbelt and an airbag, not a brake pedal!
November 11, 2020
John H.
John Daniel "J.D." Hawke is an experienced attorney with a law practice in Mobile, Alabama. He was born in Fairhope, Alabama and after earning his undergraduate degree at Auburn University, he received a law degree from Thomas Goode Jones School of Law in 2010. After law school, he formed the Law Office of J.D. Hawke LLC and over the last decade he has fought incredibly hard for each and everyone of his clients. His practice focuses on representing people facing criminal charges and clients dealing with family law matters. In addition to criminal defense and domestic relations cases, he also regularly handles contract disputes, personal injury cases, small business issues, landlord/tenant disputes, document drafting, and estate planning. He is licensed to practice law in the State of Alabama and the United States District Court for the Southern District of Alabama.
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