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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
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.
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:
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.
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.
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
I focus my practice on startups and small to mid-size businesses, because they have unique needs that mid-size and large law firms aren't well-equipped to service. In addition to practicing law, I have started and run other businesses, and have an MBA in marketing from Indiana University. I combine my business experience with my legal expertise, to provide practical advice to my clients. I am licensed in Ohio and California, and I leverage the latest in technology to provide top quality legal services to a nationwide client-base. This enables me to serve my clients in a cost-effective manner that doesn't skimp on personal service.
I am a 1984 graduate of the Benjamin N Cardozo School of Law (Yeshiva University) and have been licensed in New Jersey for over 35 years. I have extensive experience in negotiating real estate, business contracts, and loan agreements. Depending on your needs I can work remotely or face-to-face. I offer prompt and courteous service and can tailor a contract and process to meet your needs.
Tim advises small businesses, entrepreneurs, and start-ups on a wide range of legal matters. He has experience with company formation and restructuring, capital and equity planning, tax planning and tax controversy, contract drafting, and employment law issues. His clients range from side gig sole proprietors to companies recognized by Inc. magazine.
For over thirty (30) years, Mr. Langley has developed a diverse general business and commercial litigation practice advising clients on day-to-day business and legal matters, as well as handling lawsuits and arbitrations across Texas and in various other states across the country. Mr. Langley has handled commercial matters including employment law, commercial collections, real estate matters, energy litigation, construction, general litigation, arbitrations, defamation actions, misappropriation of trade secrets, usury, consumer credit, commercial credit, lender liability, accounting malpractice, legal malpractice, and appellate practice in state and federal courts. (Online bio at www.curtmlangley.com).
Real Estate and Business lawyer.
Davis founded DLO in 2010 after nearly a decade of practicing in the corporate department of a larger law firm. Armed with this experience and knowledge of legal solutions used by large entities, Davis set out to bring the same level of service to smaller organizations and individuals. The mission was three-fold: provide top-notch legal work, charge fair prices for it, and never stop evolving to meet the changing needs of clients. Ten years and more than 1000 clients later, Davis is proud of the assistance DLO provides for companies large and small, and the expanding service they now offer for individuals and families.
Braden Perry is a corporate governance, regulatory and government investigations attorney with Kennyhertz Perry, LLC. Mr. Perry has the unique tripartite experience of a white-collar criminal defense and government compliance, investigations, and litigation attorney at a national law firm; a senior enforcement attorney at a federal regulatory agency; and the Chief Compliance Officer/Chief Regulatory Attorney of a global financial institution. Mr. Perry has extensive experience advising clients in federal inquiries and investigations, particularly in enforcement matters involving technological issues. He couples his technical knowledge and experience defending clients in front of federal agencies with a broad-based understanding of compliance from an institutional and regulatory perspective.