What Is Annual Report?
All quoted companies have a legal obligation to send shareholders annual results within six months of their financial year-end. The document,called the annual report and accounts,includes a narrative on company performance and financial results with footnotes. Several components are stipulated either by the listing authority or by accounting standards setters. The company will also have sent out interim results at the half-year stage, or quarterly.
The annual report and accounts typically contains five sections that offer hard information.
• The directors’ report
This tells what the company does, usually broken down by business segment, who its directors are and what their stake in the company is. There is also a remuneration and corporate governance report. The narrative should cover any significant business or financial developments during the year and provides a review of the year’s trading.
• Profit and loss statement (P&L)
This summarizes the result of last year’s trading in figures. It tells what the company sold, what its costs were, how much profit it made, what the tax charge was, what was left for shareholders, how much of this is being paid out to them in dividends and how much ploughed back into the company. It gives comparable figures for the previous year.
• Balance sheet
This provides a snapshot of everything the company owes and owns at the end of the financial year in question.It tells what its assets are and how they are financed. Where the profit and loss account tells you how the company has performed over one year, the balance sheet reveals its fundamental health.
• Cash flow statement
This compares the amount of cash coming into the company from trading profits, investment, more efficient debt collection and so on, with the amount flowing out from trading losses, tax and dividends. Then it adds or subtracts the cash produced by capital raising or spent on capital repayment.
• Auditors’ report
This tells you whether the accounts prepared by management reflect a true and fair view of affairs and meet the legal and regulatory requirements.
