annual report research definition

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What Is an Annual Report?

• What's Included

Information for Stakeholders

Mutual fund reports, the bottom line.

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• Financial statements: Balance, income, cash flow, and equity

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

An annual report is a document that public corporations must provide annually to shareholders that describes their operations and financial conditions. The report chronicles the company's activities over the past year, may make forecasts about the future, and contains detailed financial and operational information.

Key Takeaways

• An annual report is disseminated to shareholders that spell out the company's financial condition and operations over the previous year.
• After the stock market crash in 1929, the annual report became a regular component of corporate financial reporting.
• Registered mutual funds must distribute a full annual report to their shareholders.

Investopedia / Jake Shi

What's Included

Annual reports became a regulatory requirement for public companies following the stock market crash in 1929 when lawmakers mandated standardized corporate financial reporting. It includes public disclosure of a company's operating and fiscal activities for the previous year.

The report is typically issued to shareholders and other stakeholders who use it to evaluate the firm's financial performance and to make investment decisions. An annual report contains the following sections:

• General corporate information
• Operating and financial highlights
• Letter to the shareholders from the CEO
• Narrative text, graphics, and photos
• Management's discussion and analysis (MD&A)
• Financial statements, including the balance sheet, income statement, and cash flow statement
• Notes to the financial statements
• Auditor's report
• Summary of financial data
• Accounting policies

In the U.S., a detailed version of the annual report is referred to as Form 10-K  and is submitted to the U.S. Securities and Exchange Commission (SEC). Companies may submit their annual reports electronically through the SEC's EDGAR database . Reporting companies must send annual reports to their shareholders when they hold annual meetings to elect directors.

The annual report defines whether the information conforms to the generally accepted accounting principles (GAAP). This confirmation will be highlighted as an " unqualified opinion " in the auditor's report section.

Fundamental analysts can understand a company's future direction by analyzing the details provided in its annual report. The annual report contains key information on a company's financial position that can be used to measure:

• A company's ability to pay its debts as they come due
• Whether a company made a profit or loss in its previous fiscal year
• A company's growth over several years
• How much of earnings are retained by a company to grow its operations
• The proportion of operational expenses to revenue generated

A mutual fund annual report discloses certain aspects of the fund's operations and financial condition. In contrast to corporate annual reports, mutual fund reports are best described as "plain vanilla" in their presentation.

A mutual fund annual report, along with a fund's prospectus and statement of additional information, is a source of multi-year fund data and performance made available to fund shareholders and prospective fund investors.

All mutual funds registered with the SEC must send a full report to all shareholders annually. The report shows how well the fund fared over the fiscal year. Information that can be found in the annual report includes:

• Table, chart, or graph of holdings by category (e.g., type of security, industry sector, geographic region, credit quality, or maturity)
• Audited financial statements, including a complete or summary (top 50) list of holdings
• Condensed financial statements
• Table showing the fund’s returns for one-, five- and 10-year periods
• Management’s discussion of fund performance
• Management information about directors and officers, such as name, age, and tenure
• Remuneration or compensation paid to directors, officers, and others

How Do Companies Write an Annual Report?

An annual report has a few sections and steps that must convey a certain amount of information, much of which is legally required for public companies. Most public companies hire auditing companies to write their annual reports. An annual report begins with a letter to the shareholders, then a brief description of the business and industry. The report should include the audited financial statements: balance sheet, income statement, and statement of cash flows. The last part will typically be notes to the financial statements, explaining certain facts and figures.

Is an Annual Report the Same As a 10-K Filing?

An annual report is similar to the 10-K filing in that both report on the company's activity. Both are considered the last financial filing of the year and summarize how the company performed. Annual reports are much more visually friendly with images and graphics. The 10-K filing only reports numbers and other qualitative information.

What Is a 10-Q Filing?

A 10-Q filing is a form filed with the Securities and Exchange Commission (SEC) that reports quarterly earnings. Most public companies have to file a 10-Q with the SEC to report their financial position for the quarter.

Public companies must produce annual reports to show their current financial conditions and operations. Annual reports can examine a company's financial position and, possibly, understand its plans. These reports function differently for mutual funds that report performance to shareholders.

U.S. Securities and Exchange Commission. " Speech By SEC Commissioner: Remarks Before the Securities Traders Association ."

U.S. Securities and Exchange Commission. " Annual Report ."

U.S. Securities and Exchange Commission. " How to Read a 10-K/10-Q ."

U.S. Securities and Exchange Commission. " Final Rule: Shareholder Reports and Quarterly Portfolio Disclosure of Registered Management Investment Companies ."

U.S. Securities and Exchange Commission. " Mutual Funds - The Next 75 Years ."

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What is an annual report definitions, requirements and examples.

You want to impress shareholders, attract more investors, highlight your brand, engage your employees, or just file a report with the Securities and Exchange Commission (SEC). You need an annual report - but exactly what is an annual report? 

But today, businesses and organizations create many different types of annual reports. Each type of annual report out there is designed with a very specific end goal in mind. 

If that’s what you want to learn about - you’re in the right place. 

To help you understand the world of annual reports, this post looks at everything you need to know about them - what they are, the different types, what goes into them, who reads them and how to create them. The post is broken down into the following sections. If you’d like to learn about something specific, click on a link to jump ahead. 

• What is an annual report?
• What is included in an annual report?
• Who reads an annual report?
• What is the easiest way to create an annual report?
• How do you summarize an annual report?
• How do you create an attractive annual report?

If you want to check out our annual report templates to get a sense of what they look like and get design ideas, just visit our annual report templates page. 

see all annual report templates

1. What is an annual report?

A traditional annual report is an in-depth, comprehensive overview of a business’s achievements and financial statements from the preceding year. It is produced on a yearly basis, and provided to shareholders, investors, stakeholders and others to inform them of the organization’s overall performance, financial status, and vision for the future.

Today, annual reports are often used as marketing tools for organizations to impress shareholders, investors, or donors; attract new ones; and to showcase their brand to employees, clients and others.  

This example of an annual report design makes use of friendly, illustrated icons and bright colors to liven up very dry content. Not only is it more engaging to read, the organization’s branding jumps right off the page.

get this annual report template

Companies like Mailchimp regularly publish creative annual year-in-review reports , always outdoing their previous designs.

These types of annual reports are well-designed, fun, and engaging. They share information in a way that’s exciting and easy to understand, and serve as great branding assets. These types of annual reports can also be referred to as ‘year-in-review’ reports, highlighting major milestones for that year. This isn’t just something businesses do, either. Nonprofit organizations consistently promote their cause and the impact of their organizations. Annual reports, year-in-review reports, or impact reports that highlight the past year’s achievements are all staple nonprofit marketing  tactics to gain donors and supporters. 

Just take a look at this pages out of  Novozymes  annual report. 

This is an annual report you can actually enjoy reading . The visuals are fun, engaging, informative and reflect the uniqueness of the Novozyme brand. The simple and attractive design is super helpful, since it helps us understand pretty complex information. 

2. What is included in an annual report?  

A typical annual report for a public company must have the following sections: 

• A letter from the CEO
• Corporate financial data
• Operations and impact
• Market segment information
• Plans for new products
• Subsidiary activities
• Research and development activities 

These are the barebones expectations for an annual report. Of course, depending on the size of your organization or type of organization, your annual report can range anywhere from 20 pages to 200. 

Keep in mind, actual human beings read your annual report. It doesn’t just get filed away in a dusty government basement, never to be seen again. Making it easy to read and review is essential in helping people understand your annual report’s findings and how your business is performing. 

So on top of those individual sections, it helps to include things like: 

• A cover page
• A table of contents
• Mission and vision statement
• Charts, graphs and tables
• CSR initiatives
• An afterword
• A glossary 

These are two examples of reader-friendly annual report designs.   

Year end annual report template

This year end annual report template uses a color palette that pops, quality stock photos, and organized tables to  visualize financial data and performance metrics. It includes a brief introduction and a table of contents. 

Get this year end report template

Simple nonprofit annual report template

This nonprofit annual report reduces the use of text, and relies more on visuals, icons and charts to communicate data and figures. 

Get this nonprofit annual report template

Ultimately, you decide how much information to include in your annual report, on top of what’s required. The best way to decide what to include, and how you present your annual report, is to consider the audience you’re creating an annual report for. 

3. Who reads an annual report?

An annual report’s primary audience is your shareholders. These people have a legal right to know how your company is performing, how it is changing, what it has planned for the future and other facets of its operations. 

But shareholders aren’t the only people with an interest in your company’s performance, its products, its projects, and plans for the future. More often, businesses use annual reports to present the organization’s brand as a whole. Your business’s vision for the future, its values and ideals, its social initiatives, its ambitions are all things that shareholders, as well as investors, employees, customers, donors (if you’re a nonprofit) business journalists and many others will take an interest in. 

Annual reports for your staff

Annual reports are great ways for employees to learn more about your business and the brand. They can go through an annual report to see what other projects and initiatives the company has invested in. This is helpful for large businesses with hundreds or thousands of employees.

According to the most recent HR trends , employees care more than ever about employer branding and values. Take a look at the information highlighted in the sharply designed  Roche Annual Report .

Among other things, this annual report highlights the value placed on the hard work of employees, teams and entire departments that have helped a business succeed. 

In many instances, employees are shareholders within the company and they’re just as interested in how the company is performing. It’s another way to reinforce the value of their work, by showing how their team or department has helped the company to grow. 

In the case of nonprofit organizations, annual reports help staff understand the impact of their hard work in the community. 

Annual reports for your customers

Findings from Accenture Strategy’s global survey found that customers care deeply about the values and behaviors of major brands . Millennials and Gen-Zers in particular care most about brands driven by a purpose other than profit. According to the survey, nearly 40% of respondents stated they would stop purchasing from brands that appear socially irresponsible or ethically questionable. 

You can see in this  L’Oreal Annual Report , there are sections dedicated to their ethics and values. 

Annual reports allow for a brand to present itself in the best light possible. Businesses can demonstrate the values that set them apart from competitors. They can talk about the types of suppliers and manufacturers they work with, how materials are sourced, the quality of their products, the well-being of their employees, their impact on the environment and more. 

Nonprofit annual reports for donors

Nonprofit annual reports are testaments to all the money received and hard work that nonprofit organizations have done throughout the year. I’d argue they’re absolutely essential to a nonprofit. 

Nonprofit annual reports demonstrate how the support from donors has helped to change people’s lives. After all, donors aren’t purchasing products the way customers do, what they’re “purchasing” is a social good that they want others to receive. 

Annual reports highlight exactly how people’s lives are being transformed for the better. Check out the 2018 annual report from Girls Who Code . 

Not only do they share the tremendous impact of the organization which donors want to know about - they do it in a visually creative, engaging way.

A nonprofit annual report highlights your organization’s successes, it provides some feel-good fulfillment to your staff who can look back at the fruits of their hard work, and donors know their money is being put to great use. 

A nonprofit annual report also helps you make an appeal for more donations, bigger donations, grow your paid staff, and win over more volunteers for the coming year.

4. How do you summarize an annual report?

There are two simple ways to summarize an annual report. You can create an annual report infographic, or an annual report presentation. Both are great ways to share dense data and information in a way that’s manageable for your audience. 

Annual report infographics 

Let’s start with the annual report infographic. The advantage here is that you let the data tell the story. Rather than provide pages of analysis, visualize your data through charts, graphs, and icons. Take a look at this simple shareholder report infographic: 

GET THIS ANNUAL REPORT INFOGRAPHIC TEMPLATE

The infographic focuses on a single data point. There may be layers of information that explain how that figure was determined, but this summary is practical and direct. For a more detailed report, create a long-form infographic report, by adding multiple sections that highlight individual data points. 

You can use a layout like this annual report infographic: 

get this infographic nonprofit report template

The use of text is minimal. The numbers and data tell the readers everything about the impact of the organization and how it has performed. This is an effective way to share relevant and valuable performance insights with shareholders, investors, or donors. 

see all infographic templates

Annual report presentations

An alternate approach to summarizing an annual report is to create annual report presentation slides . You can share the slide deck on its own, or help it guide your presentation on key findings in your company’s complete annual report. 

This simple annual report presentation deck dives right into the content. It’s a great example of how to break up data and make information easily digestible. 

GET THIS ANNUAL REPORT PRESENTATION

Note how the large headings tell the audience exactly what each slide is focused on. Key findings are also highlighted on each slide, to complement the data the charts/graphs show. 

If you expect a lengthier presentation slide, include an agenda or overview of your annual report presentation. This lets people know what you’ll be covering and how far along in your presentation you are. 

The key to presenting is letting your audience know where they are in your presentation. Are you only halfway through or three quarters of the way done? Even with a summary, preparing your audience helps to keep them engaged, rather than distracted. 

Our templates library has an attractive range of annual report presentation templates. Interested in designing your own? Check out our annual report presentation templates page.

SEE ALL BUSINESS PRESENTATION TEMPLATES

5. What is the easiest way to create an annual report?

As you’ve seen from the actual annual report examples I shared, and our annual report templates, annual reports are packed with a ton of content - text, visuals, charts, financial figures and more. 

Hiring a design agency to design your annual report is one option. The cost for a professionally-designed annual report ranges anywhere from $5,000 to $12,000, and then depending on the types of visuals you need, even more. 

Keep in mind, you’ll still need to pull all the content and data together yourself. 

To save your organization time and money, without compromising on design, a professional annual report template is the way to go . You can visit Venngage’s annual report templates page today, browse hundreds of unique designs for a number of industries, and use preset layouts and design styles to format your content. 

Customizing the templates is straightforward and doesn’t require any design experience. The Venngage editor is a drag-and-drop tool that’s simple to use. With it you can do a number of things like: 

• Apply your branding through Venngage’s My Brand Kit , which includes your organization logo, brand colors and brand fonts
• Use chart and graph widgets to visualize financial data, trends, statistics and more
• Add beautiful icons that really elevate your annual report design
• Apply high-quality stock photos directly from Pixabay and Unsplash (or upload your own professional images). 

6. How do you create an attractive annual report?

Why does the design of an annual report matter? Those who are interested in the information will take the time to read it, won’t they? 

Sure, but they might not understand everything you’ve tried to communicate. Keep in mind, you’re sharing tons of data and ideas. If it’s boring and dry, investors might just take a nap instead. 

I also mentioned that annual reports are a way to present your brand, and that employees and customers alike would be potential readers. How you present your organization influences their opinion of you, your values, what you’re all about and all the data you’ve packed in. 

Captivating, engaging design provides your many different readers with an enjoyable experience, and helps them walk away with your annual report’s key takeaways. So below, I'll share a handful of annual report design best practices for you to keep in mind. 

• Create a high-impact annual report cover page with large images

The cover of your annual report should grab, and hold, the attention of your readers. This can be hard to achieve without the help of a professional designer.

The workaround?

Use large, high quality images as the focal point of your cover page for a bold, eye-catching effect.

In this annual report example, bright blocks of color are combined with a full-page image to create a simple, yet striking design.

GET THIS TEMPLATE

Cover images should not be used purely for decoration. They should tell your customers, stakeholders, and employees something about the culture or values of your organization.

Use cover photos to set the tone for the report and to convey the company spirit that you’d like to project to your readers.

Does your company focus on positive customer experiences?

On company culture?

On high quality, professional products?

Take a look at how each of the companies below uses cover images to project their own, unique narrative focus. Nestle is focused on customer experiences, GE is focused on their employees, and Thermo Fischer Scientific is all about the product:

Source high quality images for a professional touch.

Using low quality or pixelated images can make the report look amateur and reflect poorly on your company or organization.

If you’re going to go with a full-page cover image, it’s worth investing in a professional photographer to take photos of real employees or customers, like L’Oreal has done for their annual report:

Otherwise, try to source high-resolution images from respected sites like Unsplash or Pixabay . You can access Unsplash and Pixabay's complete stock photo library in Venngage's editor as well. 

• Choose the right charts for your annual report metrics

Annual reports are all about the numbers, meaning that a key ingredient of creating an effective annual report is choosing the right chart for each metric .

There are a few types metrics found in most annual reports, including:

• Financial highlights (revenue, earnings per share, growth, profit margin)
• Month by month financial trends
• Sales breakdown by market and by product
• Year over year financial performance

The type of data you are visualizing should determine what type of chart you use. Let’s review the best visualization types for each type of metric.

Use “big number” charts to summarize financial highlights.

The financial highlights section of an annual report should summarize the most important facts and figures of the year simply and concisely.

The easiest way to show this assortment of different metrics in a small space is to simply write out those numbers in big, bold text. We call this type of visualization a “big number” chart.

In a big number chart, the size of each number should vary based on its importance, as shown in Concho Resources’ 2017 annual report :

As you can see in the example below, big number charts communicate key metrics quickly, clearly, and with impact.

CREATE THIS REPORT TEMPLATE

Use line charts to display monthly trends.

Line charts are the standard display for tracking changes over time, which is essential in an annual report. Investors and shareholders will want to see month by month trends for all sorts of financial metrics, including sales, profits, margins, and share earnings.

Line charts are perfect for comparing and contrasting sales trends across competitors, as seen in this annual report example:

As seen in Adidas’ 2016 annual report, line charts are particularly useful for tracking the growth of share prices over time (compared to market indices):

Use stacked bar or donut charts to show market composition.

Another core component of the finances section of an annual report is market segmentation, which shows the breakdown of annual sales into different categories.

You might break down your sales by geographic region, by product category, by customer profile...whatever helps your business identify opportunities for growth and improvement.

Traditionally, sales breakdowns are visualized with pie or donut charts, a standard method for showing part-to-whole relationships.

Pie charts, while intuitive to read, are notoriously poor data visualization tools. Most people struggle to distinguish between the size of similar pie segments at a glance.

A better choice would be a stacked bar chart, seen in the market segmentation report below.

Use grouped bar charts to compare year-over-year financial performance.

Year over year financial performance is of interest to many potential readers.

Investors, employees, and customers will all want to see how an organization’s current performance compares to that of previous years. It’s arguably the most important metric to be included in an annual report.

The most efficient method for visualizing year-over-year performance is with grouped bar charts, like these ones in GE’s 2017 annual report. The side-by-side bars emphasize the changes from one year to the next.

As seen above, it’s a good idea to use a highlight color to draw extra attention to the year of interest (2017, in this case).

• Use bold color accents to highlight key facts, quotes, and figures

Color should never be used simply for decoration in an annual report.

Although aesthetics should be a consideration, color should primarily be used to enhance communication--to clarify the information on the page.

As I just mentioned for the bar charts above, color can be used to highlight key information. It can be used to draw the reader’s attention to particularly important facts, figures, or data points in information-dense displays of text and data.

Check out how the yellow color is used to create visual contrast in this annual report example:

The contrast between the green background and the yellow highlight color draws attention to the most valuable bits of information: the data! The contrast creates points of visual focus, helping us make sense of the information on the page.

When creating your annual report, try to pick one highlight color and apply it to every key data point that you want your readers to pay attention to. The brighter, the better!

To learn more about using contrasting color schemes, check out this guide on how to use colors in infographics .

• Create a clear type hierarchy to make your annual report skimmable

Annual reports are typically quite information-heavy, with a great deal of technical information on each page.

To prevent your readers from getting lost (or worse: bored), it’s important to create a clear hierarchy of information on each page. This hierarchy will help your reader navigate through the report, allowing them to easily skim through to the most pertinent information.

You can create hierarchy by altering the size, weight, and placement of various elements. Headings should be larger than subheadings, key figures should be bolder than general body text, chart captions should be small and light, etc.

Check out how text hierarchy enhances the readability of the corporate performance annual report below. The titles and key numbers are styled in bold, black, large text, making them stand out from the rest of the page, while less pertinent text, like labels and captions, are smaller and more subtle:

When creating this visual hierarchy, it’s important to be mindful of the principles of typography. You don’t want the typography to distract from the content of the annual report.

Here are a few principles to keep in mind:

• Use a maximum of three different fonts to ensure the text is interesting but not chaotic.
• Use a stylized font for the header text and a minimal font for the body text.
• Use different font weights and styles to create contrast and draw the eye.

Want to learn more about typography for annual reports and infographics? Check out this guide on how to choose fonts .

• Create your annual report on a grid for a balanced page layout

I strongly suggest using a grid to format your annual report design.

Building off of an underlying grid framework will ensure consistency from page to page, while allowing you to experiment with different compositions (to keep your report interesting).

Using a grid can also help you create negative space, which is critical to great design. It gives the viewer time to process what they are seeing before moving on to the next section. Negative space is the core design component of most crisp, modern designs, like the one below:

• Focus on what’s important with a condensed one-pager annual report

Short, one page annual reports (also known as one-pagers) are gaining popularity as an alternative to extensive multi-page annual reports. These reports cover only the most important metrics, making it possible to grasp an organization’s performance at a glance.

One of the keys to a successful one page annual report is a simple color scheme. Pair neutral greys with a single bright highlight color for a sleek, cohesive look.

I hope this guide has answered the question, “what is an annual report”. To wrap up, here are all of the design best practices you should keep in mind when creating your next annual report.

Now you know everything there is to know about annual reports! If you still have burning question, comment and let us know. We'll share our expertise.

You can also check out more resources on report design examples, templates and tips below.

More report design guides:

55+ customizable annual report templates, examples & tips.

7 Business Report Templates You Need to Make Data-Backed Decisions

What is an Annual Report?

What does an annual report contain, who uses annual reports, related readings, annual report.

A comprehensive report detailing a company’s activities throughout the preceding year

An annual report is a comprehensive report detailing a company’s activities throughout the preceding year. Its purpose is to provide users, such as shareholders or potential investors, with information about the company’s operations and financial performance.

• Annual reports are comprehensive documents designed to provide readers with information about a company’s performance in the preceding year.
• The reports contain information, such as performance highlights, a letter from the CEO, financial information, and objectives and goals for future years.
• There are many users of annual reports, including shareholders and potential investors, employees, and customers.

Annual reports provide a significant amount of information for its readers who will be able to get a good overview of the company’s overall performance in the preceding year. It is important to note that many annual reports are not traditional reports with large amounts of text; many companies often incorporate a lot of graphics and images, resulting in a visually appealing document.

The structure of annual reports undoubtedly will vary according to each company, but most annual reports will generally contain the following:

• A letter from the president or CEO
• Performance highlights from the preceding year
• Financial statements
• Performance and outlook for future years

We will briefly go through each item in detail below:

1. Letter from the CEO

The letter from the CEO is addressed to shareholders and provides a summary of the company’s performance in the previous year. CEOs typically spend a lot of time on their letters to highlight the company’s achievements, as its performance is relative to the industry it operates in. The letter would likely mention the information of interest to shareholders since they are the primary readers of the report.

2. Performance Highlights

Annual reports usually dedicate a section to highlighting some of the company’s key achievements, such as special initiatives, goals reached, or awards received by the company or its employees. The main goal of the section is to ensure that shareholders are satisfied with their investment in the company and persuade potential investors to do the same.

3. Financial Statements

Financial statements are a key component of the annual report and provide its users with quantitative data regarding specific aspects of its financial performance in the previous fiscal year.

Annual reports typically include financial statements, such as balance sheets, income statements, and cash flow statements . In addition, there will often be graphs or charts included, helping break down the financials into easily readable information.

4. Outlook for Future Years

Annual reports typically include information regarding its future performance in order to provide shareholders with information on the company’s future goals and objectives. Investors are able to get a thorough understanding of the company’s current position in its respective industry and the company’s plans for future growth. The reports also include information regarding a company’s strategy and how it plans to implement that strategy in the coming years.

While hardcopy annual reports are still common, electronic versions are increasingly popular and can be found on the websites of many companies. Electronic versions allow the reports to be made accessible to a larger audience in PDF or other formats.

Increasingly common are interactive online reports, which allow users to virtually flip through the report and expand graphics, among other things.

Annual reports are often publicly available and cater to a large external audience, including shareholders, potential investors, employees, and customers.  The general community can also be an audience, as some companies or non-profit organizations will likely go through another company’s annual report to better understand the latter’s values to see if a partnership or other collaborative efforts are feasible.

While they are primarily used to convey financial and performance-related information, the annual report is also used as an advertising tool to highlight some of the company’s key initiatives or goals that were recently achieved.

1. Shareholders and Potential Investors

Shareholders and potential investors use annual reports to get a better understanding of the current position of the company in order to make investing decisions. The annual report helps potential investors decide whether or not to purchase stock. It also gives insight into the future plans of the company, along with its goals and objectives.

2. Employees

Employees often use the annual report to understand some of a company’s different focus areas. Many employees are also shareholders of a company due, in part, to stock option benefits and other schemes, which provide employees with incentives in being shareholders.

3. Customers

Customers of a company use annual reports to get an overview of different companies and help them decide on which one to build a relationship with. Customers are interested in working with high-quality suppliers of products or services, and an annual report enables companies to emphasize its core values and objectives.

They also make good use of the financial information contained in the annual report, which gives them a good idea of the financial position of the company.

Thank you for reading CFI’s guide to Annual Report. To keep learning and developing your knowledge base, please explore the additional relevant resources below:

• Annual General Meeting (AGM)
• Audited Financial Statements
• Earnings Guidance
• Types of SEC Filings
• See all accounting resources
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Understanding Annual Report: Definition, Components, and Importance

An annual report is a comprehensive document prepared by a company at the end of its fiscal year to provide shareholders and other interested parties with a detailed overview of its financial performance and operations. This document serves as a key communication tool between the company’s management and its stakeholders.

Table of Contents

Components of an annual report, financial statements.

Financial statements are a critical component of an annual report and include:

• Balance Sheet: Provides a snapshot of the company’s financial position, detailing assets, liabilities, and shareholders’ equity.
• Income Statement: Shows the company’s revenues, expenses, and profits or losses over the reporting period.
• Cash Flow Statement: Tracks the cash inflows and outflows from operating, investing, and financing activities.

Management Discussion and Analysis (MD&A)

MD&A offers insights into:

• Performance: Explanation of the company’s financial results and factors influencing performance.
• Strategy: Discussion of business strategies, challenges, and future plans.
• Risk Factors: Identification and assessment of risks impacting the company’s operations and financial health.

Corporate Governance and Ownership Structure

Corporate governance section covers:

• Board of Directors: Composition, responsibilities, and governance practices.
• Executive Compensation: Details of salaries, bonuses, and other forms of compensation for top executives.
• Ownership Structure: Information on major shareholders and their voting rights.

Auditor’s Report

The auditor’s report provides an independent assessment of the accuracy and fairness of the financial statements presented in the annual report.

Importance of Annual Reports

Transparency and accountability.

Annual reports promote:

• Transparency: Providing stakeholders with a clear view of the company’s financial health and performance.
• Accountability: Holding management accountable for their decisions and stewardship of shareholder funds.

Decision-Making Tool

Investors and stakeholders use annual reports to:

• Assess Performance: Evaluate the company’s financial strength and profitability trends.
• Compare Competitors: Compare financial metrics with industry peers to gauge relative performance.
• Make Informed Decisions: Guide investment decisions based on the company’s financial outlook and strategic direction.

Regulatory Compliance

Annual reports fulfill regulatory requirements:

• Legal Obligation: Companies are mandated by law to prepare and disclose annual reports to ensure transparency and compliance with accounting standards.
• Investor Confidence: Regular reporting fosters investor confidence by providing reliable information for decision-making.

Example of an Annual Report

For example, XYZ Corporation’s annual report for the fiscal year ended December 31, 2023, includes:

• Financial Highlights: Summary of key financial metrics and performance indicators.
• Management Discussion: Analysis of business performance, market trends, and strategic initiatives.
• Financial Statements: Detailed balance sheet, income statement, and cash flow statement.
• Corporate Governance: Overview of board structure, executive compensation, and governance practices.
• Auditor’s Opinion: Independent auditor’s assessment of the financial statements’ accuracy.

In conclusion, annual reports play a crucial role in corporate communication and transparency, providing stakeholders with a comprehensive view of a company’s financial performance, governance practices, and strategic direction. By analyzing annual reports, investors can make informed decisions, monitor investments, and hold management accountable. Understanding the components and significance of annual reports is essential for anyone involved in finance and investing.

For further information on annual reports and their role in corporate governance, refer to industry standards, financial publications, and regulatory guidelines. Accessing annual reports directly from company websites or financial databases provides firsthand insights into corporate disclosures and performance metrics.

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Annual Report Analysis: Definition, Components, Example, How to Do, Uses

• Fundamental Analysis Guide
• Annual Report Analysis: Defi...

An annual report is a comprehensive document that public companies publish each year to provide shareholders and the public with an overview of the company’s financial performance and business operations in the previous fiscal year. Annual reports are the audited financial statements, including the income statement, balance sheet, and cash flow statement. These financial statements contain critical data that investors use to evaluate the company’s profitability, liquidity, growth trends, and overall financial health. 

In addition to financial statements, annual reports also include important qualitative information like a letter from the CEO outlining business strategies and accomplishments, a management discussion and analysis section providing context around financial results, and details on the company’s products, markets, competitors, and outlook. 

Together, all these components give stakeholders a holistic view of the company from both a numerical and narrative perspective. Conducting an annual report analysis by examining these various sections allows investors to thoroughly assess the company’s competitive positioning, management’s effectiveness, valuation, and long-term investment potential.

What is an annual report?

An annual report is a comprehensive report on a company’s activities and financial performance over the previous year. The annual report contains vital information about the company’s operations, financial statements, business highlights and strategies, risks, management team, and outlook. Publicly traded companies are required by law to provide annual reports to their shareholders.

It allows investors to evaluate the company’s financial health and growth prospects. Investors heavily rely on annual reports to make investment decisions. It provides crucial insights that are not available through regular disclosures like quarterly reports. The report offers a holistic picture of where the company stands financially, how efficiently it is being managed, growth opportunities, and threats facing the business.

The financial statements form the core of an annual report. They include the income statement, balance sheet, cash flow statement, and statement of shareholders equity. These statements are audited by independent accountants to ensure accuracy and conformance to accounting standards. The income statement shows the company’s revenues, expenses, taxes, and net profit or loss over the year.

The balance sheet presents a snapshot of assets, liabilities, and shareholders’ equity on the last day of the fiscal year. The cash flow statement outlines the inflows and outflows of cash. The shareholder’s equity statement shows changes in equity accounts like share capital, reserves, and retained earnings.

What’s the history of the annual report?

The annual report has a long history intertwined with the evolution of stock markets and corporate financial reporting. Though some early corporations published annual reports sporadically in the 19th century, the practice became widespread only in the early 1900s. The need for standardized annual reporting arose from the separation of ownership and management in joint stock companies that emerged during the Industrial Revolution. 

In the late 1800s, massive corporations like railroads and steel mills began selling stocks and bonds to the public to raise capital. The dispersed shareholders were not involved in daily operations. So, companies had to disclose financial statements and business details to owners annually through formal annual reports. Laws were eventually enacted to mandate financial disclosures to protect investor interests.

One of the first examples of an annual report was published by the Baltimore and Ohio Railroad in 1828, containing a balance sheet and income statement. However, most railroads did not follow suit until the 1850s. The reports focused solely on financial results initially. However, competitive pressures led companies to showcase their operational progress through Annual Reports to highlight growth and innovation. 

The New York Stock Exchange began recommending that listed firms distribute annual reports to shareholders starting in the 1860s. But very few companies complied at first. It was only in 1895 that the NYSE mandated shareholder approval of external auditors to bolster report credibility. This paved the way for standardized accounting disclosures. 

In the early 20th century, major consumer product firms like General Electric, U.S. Steel, General Motors, and Standard Oil developed exemplary annual reports combining financials with operational details, priorities, risks, and outlook. The reports were used to shape public perception of the company. Firms mailed elaborately designed and illustrated reports to influence investors.

The stock market crash of 1929 led to reforms like the Securities Act of 1933 that required audited financial statements in annual reports of public firms. The Securities Exchange Act of 1934 established the Securities Exchange Commission (SEC) to regulate markets and enforce transparency through filings like 10-K annual reports. This marked the beginning of modern annual reports with standardized content and presentation.

Over the decades, the SEC expanded disclosure requirements for annual reports, such as management discussions of operations, executive pay, related party transactions, risk factors, and quarterly financial data. The 1978 Bankruptcy Reform Act mandated a statement of cash flows. Technology firms led the way in using annual reports for detailed business discussions from the 1950s. The focus shifted from shareholders to the wider investment community. 

In the stock markets, individual investors glean important information from annual reports to pick stocks. Analysts and fund managers thoroughly analyze the reports to inform investment decisions and recommendations. The reports allow assessment of management capability, competitive position, growth opportunities, risks, and financial health – key to stock valuation. Historical information enables trend analysis.

What are the components of an annual report?

An annual report provides a company profile, vision, product information, operational and financial highlights, management discussion and analysis, governance, share price data, accounting policies, audited financial statements with notes, and an auditor’s report.

1.Company profile

The company profile section offers investors key background information on the business. It includes details like the year and state of incorporation, company headquarters, nature of business activities, major product brands, and number of employees. It outlines the overall organizational structure with subsidiaries and operating segments. Investors better understand the scale of operations, diversification across business lines and geographies, and corporate history from this profile.

Reviewing the evolution of the company over decades provides perspective on the growth trajectory and competitive strategy. For stock analysis, the profile enables sizing up the business scope and evaluating branding, market reach, and labor productivity based on revenue and headcount numbers. The profile sets the overall context to interpret the rest of the annual report appropriately.

2. Companies vision

The vision statement communicates the company’s strategic aspirations and direction to investors. It describes where the company aims to reach over the next 5-10 years and how it seeks to position itself in the marketplace. Understanding the vision provides insight into the growth strategy and forecasted evolution of the business.

Investors assess if the vision is aligned with broader industry trends and competitive dynamics. An ambitious vision indicates potential for greater expansion and stock price appreciation but also implies higher execution risks. A vague, generic vision signals a lack of strategic clarity. Evaluating the vision is important for stock investors to gauge the management’s strategic thinking and ability to capitalize on future opportunities that drive revenues and profits.

3. Products

The products section offers a descriptive overview of the company’s main goods and services, key features, target customer segments, and applications. For investors, reviewing product details provides insights into customer needs being addressed, competitive differentiation, market positioning, and growth potential.

The range and mix of new versus established products indicate business focus areas, innovation pipeline, and revenue stability. Investors assess product pricing strategy, lifecycles, and contribution to sales from this section. It is also a useful indicator of business diversification and reliance on any single product line. Analyzing products allows stock investors to estimate revenues and gauge market share and competitive advantages that ultimately impact valuation.

4. Operation highlights

The operational highlights summarise key business developments, milestones, and metrics from across the company’s divisions over the year. Investors quickly gather insights into the growth initiatives undertaken, major partnerships formed, new products/services launched, facilities added, issues faced, and business restructuring done.

Tracking year-on-year operational progress gives perspective on the management’s execution capabilities. The highlights cover vital parameters like revenue growth, market share shifts, cost management, and productivity improvements. Analyzing these performance indicators allows stock investors to identify strengths, weaknesses, and overall competitiveness of the company’s business model and strategy. This informs investment decision-making.

5. Financial highlights

The financial highlights present key metrics that summarise the company’s financial performance over the year. Typical metrics include revenue growth, profit margins, earnings per share, cash flow, debt levels, and returns on equity. These showcase the core results across critical parameters in a snapshot.

Investors quickly assess sales growth trends, profitability, liquidity position, and capital returns from these highlights before delving into the audited financial statements. The highlights also often include financial ratios like P/E, current ratio, and debt-equity ratio. Analyzing highlights gives stock investors an overview of the business health, operating leverage, and growth effectiveness essential for investment decisions like buying, selling, or holding the stock.

6. Directors report

The directors’ report contains a summary review of the company’s operations, strategic priorities, risks, R&D activities, HR practices, and outlook. It offers the board’s perspective on overall performance and the road ahead. Investors gain insights into the board’s thinking around plans, challenges, and opportunities.

The report also discloses material developments, regulatory actions, corporate restructuring, and other legal matters over the year. Analyzing this commentary allows stock investors to evaluate whether the board has a sound understanding of the business environment and is providing effective oversight. The directors’ strategic review and future guidance influence investor confidence and sentiment towards the company’s prospects and stock price outlook.

7. Chairperson’s report

The report or letter from the chairperson provides their perspective on the company’s performance, strategic direction, and goals for the future. It offers a high-level review of the operating context, key initiatives, risks, and significant developments during the year. As the chairman is responsible for leading the board of directors, their views give investors direct insights into board-level thinking and priorities.

The letter often discloses critical matters the chairman wants to highlight, like leadership changes, business restructuring, acquisitions, or regulatory actions. For stock investors, the chairman’s commentary provides qualitative insights into governance practices, management capability, and competitive strengths that inform investment decisions and analysis of the stock’s future outlook.

8. Management discussion & analysis (MDA)

The Management Discussion & Analysis (MD&A) section provides the company’s perspective on operational and financial performance. It analyses the reasons behind revenue and profit trends, segment-wise results, market share shifts, cost changes, and other variations in the financial statements. The management also discusses business risks, growth strategies, and outlook.

For stock investors, the qualitative insights in the MD&A are invaluable to understanding management capability, competitive positioning, and growth prospects. By correlating the MD&A with financial statement data, investors evaluate operating execution, capital allocation, and future earnings potential that drive stock valuations and investment decisions.

9. Corporate governance

The corporate governance section outlines the company’s governance practices, board structure, leadership team, and executive compensation policies. It provides details on board diversity, director independence, committee roles, and succession planning. For stock investors, evaluating governance quality gives insights into oversight effectiveness, business ethics, and risk management.

Strong governance indicates company-wide accountability, transparency, and focus on long-term stakeholder value. Weak governance is a red flag for mismanagement and disregard for minority shareholders. Analyzing governance helps investors incorporate risks into valuation and investment decisions. Good governance improves investor confidence and typically correlates with superior stock price performance.

10. Share price

The share price data section graphs the company’s stock price movement over the year benchmarked against indices like the broader market index. It also provides key stock data like market capitalization, price-earnings ratio, dividend yield, and share turnover ratio. For stock investors, analyzing the share price chart gives insights into investor sentiment and reaction to corporate newsflow and results announcements. Comparing valuations like P/E with industry peers indicates relative expensiveness. Examining trading volumes points to liquidity. Evaluating share price data in light of financial performance allows investors to identify potential under or overvaluation to make appropriate buy, sell, or hold decisions.

11. Accounting policies

The accounting policies section describes the accounting rules, conventions, and procedures adopted by the company for preparing its financial statements. Companies are required to disclose policies related to revenue recognition, depreciation, foreign currency translation, valuation of inventories, investments, goodwill, and other material items.

For stock investors, understanding the accounting policies provides clarity on how different transactions and line items have been accounted for in the financial results. This enables meaningful analysis and comparison of financial ratios across time periods and peer companies to make informed investment decisions. Evaluating accounting policies also reveals potential red flags like aggressive assumptions or choices that distort the true financial position.

12. Auditors report

The auditor’s report contains the independent auditor’s opinion on the accuracy and conformity of the company’s financial statements. Auditors perform verification procedures to assess if the statements present a true and fair view as per accounting standards. A clean audit opinion validates the reliability of the financial data used by investors in valuation models and stock research.

Any reservations, adverse opinions, or disclaimers from auditors should raise concerns regarding information quality. Evaluating auditor comments also provides insights into accounting practices. Overall, the audit report is a key indicator of financial statement credibility for stock investors when judging the health and future prospects of the business. Its findings directly impact investor confidence and risk perception of the stock.

13. Unaudited information

An annual report contains both audited and unaudited information. The non-audited portions include the chairman’s statement, directors’ report, management discussion and analysis, business description, operational highlights, and corporate information sections. While these provide useful business insights and context, investors should recognize that the information has not been independently verified.

Evaluating the credibility and objectivity of the unaudited content is prudent. However, the audited financial statements remain the core component for stock analysis. Investors should base their valuation models and investment decisions predominantly on audited financial data and make use of unaudited sections only to complement business understanding. Relying heavily on unverified information poses risks for stock investors.

14. Financial statements 

The financial statements, including the balance sheet, income statement, cash flow statement, and accompanying notes, form the most critical part of an annual report for stock investors. The audited statements provide comprehensive details on the company’s financial standing, operating results, profitability, liquidity, capital structure, and cash flows. Investors utilize this quantitative data extensively for ratio analysis, valuation modeling, growth forecasting, and assessing investment potential.

The statements, including the Balance Sheet, also enable comparative analysis versus peers and historical performance. Along with segment-wise results, the Balance Sheet and other financial statements supply the hard numbers that drive most stock investment decisions and analytics. Thoroughly analyzing the Balance Sheet and other financial statements is essential for stock investors to determine the company’s true financial health and prospects. This detailed examination of the Balance Sheet helps investors gauge the company’s asset, liability, and equity position, crucial for informed investment decisions.

15. Notes to financial statements

The notes to financial statements provide additional details, commentary, and disclosures related to the balance sheet, income statement, cash flow statement, and accounting policies. Notes reveal granular information on revenue breakups, cost components, outstanding litigations, off-balance sheet items, related party transactions, segment financials, and other material events.

For stock investors, notes offer critical supplementary insights to facilitate in-depth financial analysis and modeling. The notes also highlight accounting policy choices that impact reported results. Investors better understand the underlying business dynamics that determine earnings quality and cash generation capability from the detailed disclosures in the notes. Evaluating this information empowers more informed stock investment decisions.

What is an example of an annual report?

To showcase an example of an annual report based on a recent Indian company, let’s delve into the 2022-23 annual report of Infosys, a leading IT giant.:

Infosys’ annual report paints a vivid picture of their year, starting with a captivating chairman’s message. Salil Parekh, the CEO, emphasizes their unwavering commitment to innovation, highlighting key achievements like the Infosys Cobalt platform, their cloud-native offerings, and their focus on sustainability. He underscores the company’s resilience in navigating a complex global landscape while adapting to evolving client needs.

The report then dives into the financial performance, presenting a clear and concise overview of revenue, profitability, and key financial metrics. Charts and graphs illustrate trends and growth, making it easy for readers to grasp the company’s financial health. Importantly, the report also addresses any challenges faced and the steps taken to overcome them, demonstrating transparency and accountability.

Infosys’ annual report goes beyond just financial figures. It showcases the company’s commitment to its employees, highlighting initiatives like talent development programs, diversity and inclusion efforts, and employee well-being programs. It also sheds light on their social responsibility endeavors, showcasing their contributions to communities and the environment.

The report concludes with a glimpse into Infosys’ future aspirations. It outlines their strategic priorities, focusing on areas like automation, artificial intelligence, and cybersecurity. This forward-looking perspective assures stakeholders of the company’s preparedness for the evolving technological landscape.

Infosys’ annual report is not just a collection of numbers and facts. It’s a compelling narrative that tells the story of a company driven by innovation, resilience, and a commitment to making a positive impact. It leaves readers with a clear understanding of the company’s achievements, challenges, and vision for the future, making it a valuable resource for investors, employees, and stakeholders alike.

How to do an annual report analysis?

Conducting an annual report analysis involves examining the financial statements, business overview, management discussion, footnotes, and proxy statements to assess the company’s financial health, competitive position, growth drivers, management quality, valuation, and overall investment potential compared to industry peers.

10. Step-by-step guide on how to analyze an annual report for stock market investment purposes is given below.

Read the Letter from the CEO

Start by reading the letter from the CEO to get an overview of the company’s performance and strategic direction. Look for highlights of the year, key accomplishments, challenges faced, and the outlook for the coming year. This letter often summarises financial results and provides insights into management’s priorities and concerns. Flag any areas the CEO emphasizes as needing improvement or posing challenges.

Review the Financial Statements  

The three key financial statements are the income statement, balance sheet, and statement of cash flows. Read the accompanying notes and auditor’s report as well. While reviewing the financial statements, focus on revenue growth – is it increasing at a healthy rate? Look for steady or accelerating growth as a positive sign. Examine profit margins and whether they are improving or declining.

Healthy margins indicate pricing power. EPS trends are also important, as rising EPS typically leads to share price appreciation. Assess balance sheet health by checking if the company has sufficient liquidity and reasonable debt levels. Finally, evaluate cash flow strength, as this indicates how well the company is generating cash from operations. Positive trends in these areas over the past 3-5 years are ideal.

Analyse Business Segment Performance

Look into how major business units have performed. Identify the profitable segments driving growth as well as lagging segments. Look for rising market share in key segments. Changes in segment revenue mix indicate a shift in strategy.

Understand the Company’s Products/Services

Review sections on the company’s business model, products, and competitive advantages. Make sure you understand how the company makes money and what key offerings drive performance. Learn about upcoming products in its pipeline as well. This will help assess future growth drivers.

Read the Management Discussion and Analysis 

This section provides the management’s perspective on operating results. Look for explanations of major changes in financial statement items from year to year. Management will highlight issues and trends impacting performance. It’s a good reality check on the numbers.

Check the Footnotes and Proxy Statement

Footnotes contain important details on accounting policies, lawsuits, acquisitions, debt covenants, and more. The proxy statement outlines executive compensation, governance practices, shareholders, and officers. This provides insight into management quality and incentives.

Estimate the Intrinsic Value 

Based on your analysis, develop a valuation model to estimate the company’s intrinsic value. Project future cash flows and use valuation multiples like P/E to estimate a target share price range. Compare this to the current market price to identify potential under or over-valuation.  

Competitor and Industry Analysis

Analyse annual reports of major competitors and industry trends. This provides perspective on how the company is positioned relative to peers. Look for higher revenue/profit growth, market share gains, and superior return on capital versus rivals. 

Assess Moats

Study the business to identify economic moats or sustainable competitive advantages. These signal an ability to maintain high returns on capital and excess profits. Common moats include network effects, cost advantages, intangible assets like brands, and high switching costs for customers.

Final Evaluation 

Given your analysis, evaluate the company’s overall prospects. Consider growth outlook, financial strength, competitive position, management, and current valuation. Determine if the stock is a good investment at today’s price. Establish price targets to consider entering or selling the stock.

By following these steps, you will be able to thoroughly analyze a company’s annual report. This helps make informed investment decisions based on the company’s financials, competitive position, and long-term growth potential. Annual report analysis takes time and practice, but it’s a fundamental part of making wise stock picks.

What are the uses of an annual report?

An annual report is used to provide a comprehensive overview of a company’s financial performance, business operations, strategies, risks, and growth prospects that investors analyze to evaluate the health and potential of the company as an investment. Annual reports are comprehensive documents that public companies release every year to provide their shareholders and the public with a detailed overview of the company’s financial performance and operations over the previous 12 months. 

First and foremost, the financial statements included in annual reports offer crucial insights into a company’s profitability, growth trends, balance sheet strength, cash flows, debts, assets, and other aspects of its financial health. Investors use these audited financial statements to gauge a company’s stability, analyze how efficiently it is using shareholder capital, assess the potential risks and red flags, spot changes in financial metrics year-over-year, and make more informed investment decisions about buying or selling the company’s stock. The income statement, balance sheet, cash flow statement, and accompanying notes provide the hard numbers and context needed for rigorous financial analysis.

Another key component of annual reports is the letter to shareholders from the company’s top executives. This letter provides an overview of the company’s performance, highlights important events, articulates strategic vision and business priorities going forward, and offers qualitative insights to complement the quantitative financial data. For investors, the shareholder letter offers clues into management’s leadership abilities, candor, and decision-making. It also summarises key developments and plans that impact future growth and profitability. 

In the management discussion and analysis (MD&A) section, companies analyze their financial results, which helps investors interpret the raw numbers in the proper context. The MD&A provides management’s perspective on what drove financial outcomes and events affecting the business. This commentary is invaluable for investors seeking to understand key inflection points, such as changes in demand, new product launches, acquisitions, executive transitions, legal matters, and more. 

Annual reports also give visibility into factors that make a company successful but are not quantifiable. Details on company operations, new initiatives, research and development goals, employee talent, partnerships, industry leadership, competitive advantages, risks, and opportunities help investors make more nuanced evaluations of a company’s health and potential. The non-financial information found in annual reports provides crucial qualitative insights.

Public companies know their annual reports are important communication mechanisms for existing shareholders and potential investors evaluating their stocks. They use annual reports as marketing documents to portray their brands, showcase products and services, highlight satisfied customers, demonstrate social responsibility and environmental stewardship, and present the company in the best possible light. Savvy investors read annual reports while being mindful of this PR sheen.     

With so much riding on annual reports, the SEC dictates strict transparency, compliance, and disclosure requirements for these documents. False or misleading information is unlawful and diminishes a company’s credibility. While spin and puffery exist, outright lies are forbidden. This regulatory oversight increases the reliability of annual reports compared to other corporate communications. Investors should still scrutinize the information critically rather than accept it as gospel.   

Who uses an annual report?

Annual reports are used by investors, financial analysts, shareholders, creditors, business partners, employees, regulators, media, and the general public to assess the financial strength, strategic direction, and overall health of a company.

For investors and shareholders, the annual report represents the most important resource for conducting due diligence on companies they consider investing in. By analyzing the audited financial statements, footnotes, and management discussion, individual investors better evaluate the company’s profit drivers, financial health, valuation, competition, executive competence, and long-term vision before determining whether to buy, sell, or hold the stock. Institutional investors such as hedge funds, mutual funds, and pension funds leverage the annual report details and metrics to feed into their sophisticated valuation models, stock ratings, price targets, and investment recommendations. Fund managers depend on these analytics and insights to prudently allocate capital across sectors and asset classes.

Equity research analysts at investment banks and financial service firms spend weeks poring through annual reports to produce in-depth reports for their firm’s clients and investors. Their detailed analyses distill the most important takeaways from annual reports that impact their stock ratings, price targets, and buy/sell recommendations. These widely circulated reports help guide billions of dollars in investments by their firm’s clients. Financial advisors also rely heavily on annual report details and analyst research to advise clients on investment opportunities and portfolio strategy. 

How do you find a company’s annual report?

To find a company’s annual report, check their investor relations website, use search engines to look for their latest annual report filing, or request a physical copy from the company’s investor relations department.

To locate a company’s latest annual report, the first stop is usually their investor relations website. Public companies are required to maintain investor relations pages that provide current and historical financial information. This includes links to download the latest annual report, as well as past annual reports for comparison. The investor relations site should also contain the date the latest report was filed, helping investors confirm they have the most current version.

What are the limitations of an annual report?

The limitations of annual reports are the potential biases in perspectives from management, accounting discretion that distorts financial realities, inadequate transparency on key issues, and snapshot nature that misses significant developing events between reporting periods. One key restraint is that annual reports present information from management’s perspective. Financial results, business overviews, and shareholder letters are written directly by company executives, providing a decidedly positive spin on the company’s situation and future outlook.

Investors must read reports with the understanding that disclosures are aimed at portraying the company in the most favorable light. Annual reports are also limited by the discretion allowed in accounting rules and financial reporting standards. Companies adhere to GAAP principles but still have leeway in choices such as revenue recognition, inventory valuation, depreciation methods, and accrual policies. These choices obscure true financial performance. Earnings management through discretionary accruals has long been a concern as well. Only by digging into footnotes can investors attempt to unravel the underlying realities.

How does an annual report help in fundamental analysis?

An annual report is one of the most important sources of information for conducting a fundamental analysis of a company. The annual report contains detailed financial statements, information about operations, risks, opportunities, and management discussions that provide invaluable insights into a company’s performance and prospects. 

The financial statements, such as the income statement, balance sheet, and cash flow statement, contain quantitative data on a company’s financial health. Analysts calculate financial ratios like profit margins, return on equity, and debt-to-equity to assess profitability, efficiency, liquidity, leverage, and other aspects of a company’s financial position. The income statement shows revenues, expenses, profits, and losses. The balance sheet gives a snapshot of assets, liabilities, and shareholder equity. The cash flow statement outlines the company’s cash inflows and outflows. Comparing financial ratios year-over-year indicates improvement or deterioration in financial performance.

The management discussion and analysis provide the company’s perspective on operations, financial results, strategies, challenges, risks, and opportunities. This qualitative commentary provides color and context for the financial data. Analysts assess the soundness of management’s plans and evaluate future prospects based on their strategic discussions. The MD&A highlights key factors driving the company’s performance, which aids in analysis.

The business overview and segment analysis outline the company’s products, services, markets, competitive landscape, and market position. This enables analysts to understand the company’s operations, sources of revenue, competitors, and external environment. Market share, growth rates, new products, and other operational metrics give insights into the effectiveness of a company’s business strategies.  

Information on acquisitions, capital expenditures, new plants, and expansion plans indicates a company’s growth strategies. Analysts determine whether expansion plans are justified by revenue growth and align with the company’s strengths. Forecasts of capital expenditures help estimate future cash flow needs.  

Risk factor analysis, an integral part of fundamental analysis, is also a key section. It highlights potential risks ranging from macroeconomic factors, industry competition, supply chain issues, litigation, regulatory changes, and other external threats. Fundamental analysis helps analysts assess whether the company is prepared for downside scenarios. This process involves delving deeply into various aspects of the company through the lens of fundamental analysis, evaluating its resilience and adaptability in the face of potential challenges.

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Please note you do not have access to teaching notes, corporate annual reports: research perspectives used.

Accounting, Auditing & Accountability Journal

ISSN : 0951-3574

Article publication date: 1 October 2002

Corporate annual reports are viewed through the lens of researchers of these documents. The aims are to obtain insight into how researchers view annual reports; to ascertain how the different ways of seeing the annual report relate to each other; and to draw out the gaps in this diverse research in a continuing attempt to understand its role and purpose. Selective examination of a decade of corporate annual report research (1990‐2000) reveals how researchers have sought to find visibility and meaning. Few studies address the document as a whole, in terms of the integration of the messages between the various parts of the report. Explanation of the changing structure and content of annual reports remains divided, largely because of the differing perspectives of researchers. They have revealed diversity in the ways of seeing the annual report and a tension in understanding its overall purpose and role.

• Company reports
• Corporate image
• Accountability

Stanton, P. and Stanton, J. (2002), "Corporate annual reports: research perspectives used", Accounting, Auditing & Accountability Journal , Vol. 15 No. 4, pp. 478-500. https://doi.org/10.1108/09513570210440568

Copyright © 2002, MCB UP Limited

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In this guide, I'll walk you through what an annual report is, why you need it, and what you should include. I'll also share some tips and annual report examples to help you create annual reports your customers and investors actually want to read.

What Is an Annual Report? An Annual Report Definition

You may be wondering, what is an annual report and what is its purpose? 

An annual report provides companies' financial and operating information to regulatory authorities, shareholders and investors. 

As our annual report definition suggests, these reports are published once a year. In contrast, companies may be required to file earnings reports at specific times throughout the year. 

For example, the US Securities and Exchanges Commission expects companies to file earnings reports each quarter, and an annual report at the end of the fiscal (or financial) year. Financial year ends usually coincide with the end of a quarter, so typical dates for the end of reporting are March 31, June 30, September 30, or December 31.

Annual reports can be published in different places. As well as completing the regulatory filing, companies may share top findings via earnings calls. They may also publish their annual report on their websites. 

Find the Best Annual Report Templates

If you're looking for the best annual report templates to create your next annual report, Envato Elements has a great offer you won't want to miss. Download as many annual report examples as you want all for one low price. 

To find the perfect annual report template, go to Envato Elements and select Graphic Templates next to the on-screen search box. Type in annual report . You'll see thousands of attractive annual report templates you can use for your next filing. 

Here are three of our top picks to get you started: 

1. Annual Report Brochure

Wondering what is an annual report for a business? This brochure will help you create the perfect annual report. It's got 24 pages, uses free fonts and is easy to edit with the latest versions of InDesign.

2. Corporate Annual Report

What is a corporate annual report without a bit of color to liven things up? The 48-page annual report template lets you customize colors with just a couple of clicks. It includes US Letter and A4 sizes and is easy to edit and customize in InDesign.

3. Annual Report Corporate Brochure

Looking for a minimalist design for your next corporate annual report? This stylish A4 annual report template could be the right choice. It's got a clean design and is easy to edit in InDesign.

Envato Elements is a great choice when you want to change the design of your annual report regularly. But if you're looking for annual report examples for one-off use, check out the annual report templates available on GraphicRiver. 

Why You Need an Annual Report

So, what is the purpose of the comprehensive annual financial report? Why is it so important for companies to have one? As noted earlier, one of the main reasons is that it's a legal and regulatory requirement for many companies. 

An annual report keeps your company in good standing from the legal and financial viewpoint. If you don't file your annual report on time, your company might have to pay fines or extra fees. And in some cases, failing to remain in good standing might mean you're not allowed to keep trading. 

Annual reports are also a great way for companies to introduce their management teams, show off achievements, and talk about plans, 

Types of Annual Reports

There are four main types of annual reports: 

• the corporate annual report
• the small business annual report
• the nonprofit annual report
• the alternative annual report

Let's take a brief look at what each of these involves:

1. Corporate Annual Report

When considering what an annual financial report is, the corporate annual report is what most people think of. This is a report filed by publicly traded companies with their local stock exchange or regulatory body. 

For example, US companies file their annual reports with the Securities and Exchange Commission. UK companies file theirs with Companies House and announce the filing on the stock exchange. If you're planning to file a corporate annual report, check the filing requirements for your country and location. 

2. Small Business Annual Report

Unless you're running a private company, you'll need to file an annual report for your LLC. What is an annual report for an LLC, what's required? In the US, that depends on the state. Small business annual reports are often shorter and simpler than corporate filings. But check the requirements of your country or location to see what you need to include for your business to remain in good standing.

3.  Nonprofit Annual Report

Though nonprofits usually enjoy tax benefits, they still have to file a statement of accounts to stay in good standing. While the financial reporting requirements are usually less onerous than for large public corporations, annual reports give nonprofits a great opportunity to report on their achievements in the past year. 

4. Alternative Annual Report

An alternative annual report won't always meet legal filing requirements, but it can be a great way to tell the story of your company's year your way. A lot of tech and SaaS companies provide alternative annual reports online to highlight interesting facts and figures about their business. 

Key Parts of Annual Reports

Alternative reporting aside, here are some of the key elements to include in annual reports.

First of all, there are financial statements. There are four types of financial reports you've got to include:

• a balance sheet (a statement of assets and liabilities)
• an income statement (covering revenue and expenses)
• a cash flow statement (covering cash management from different activities)
• an equity statement (covering the value of and changes to company shares) 

You'll also need to include any explanatory notes that relate to these statements, or to regulatory compliance. And if regulations mandate the filing of audited financial statements, you'll also have to include an auditor's report.  

Other key parts of the annual report include:

• Corporate, business or non-profit info - details about the name, address and contact information of your business entity. You'll also include names and titles of key executives or directors.
• Non-financial content related to the operations and achievements of the company. For example, this is where you might report on how you're achieving your mission
• Reports by the chair, CEO or business owner to put the finances and achievements into context

How to Create an Annual Report

Ready to create your first annual report? Here's how you get started.

Remember what an annual report is and what its purpose is. So, start by making sure you've got all the right financial information available in the required format to meet your local filing regulations. 

Next, work out what story those numbers tell, and what you want people who read the annual report to take away. Collect accomplishments you want to include such as specific achievements or milestones and initiatives where your company has made a difference. Check your previous annual report to see what was planned or promised that you can report on this year. 

Once you know the story you're telling, start the process by creating a CEO's or chair's letter that'll go at the front of the annual report. Include key messages and highlights from the year to guide readers on what to look out for. Think of it as a kind of executive summary for your annual report.

Then prepare the rest of your report. You can give more detail on activities and initiatives. Collect some photographs to use as illustrations throughout the annual report. These days, annual reports don't have to be dry; they can be interesting, and, in the case of alternative annual reports, even interactive.

Once you've got all the elements together, it's time to think about the design. Consider:

• Deciding on fonts for headers, subheads and body text. Don't use too many fonts, as that can be visually confusing. Instead, try different font weights for headings and subheadings.
• Lay out your text, dividing it into small paragraphs for easy readability.
• Include photographs that relate to your text to make the pages more attractive.

Remember, if you want a head start on designing your annual report you can take advantage of the annual report templates from Envato Elements. These will save you time while helping you achieve a professional look for your annual report. 

3 Cool Annual Report Examples

Want to get some ideas for your next annual report? Here are three annual report examples to inspire you.

1. Gates Foundation Year in Review

This online annual report includes the CEO's letter at the top, and financials and business information near the end. In between, there are four key areas of work that you can click on for more detail, insights and statistics.

2.  Girls Who Code Annual Report 

As you'd expect from a more tech-minded report, the Girls Who Code annual report has some nice features. For example, text appears as you scroll to it while reading the CEO's letter. Numbers on charts and stats increase as you watch, but there are also links so you can jump to the section that interests you most.

3. CPA Ontario Annual Report 

CPA Ontario has a more traditional but still attractive annual report. It keeps font use to a minimum, has consistent design, and includes short letters from the chair and the CEO. You can see how their annual reports have evolved over the years. This is a good example for a small business or corporate to follow. 

Learn More About Annual Reports

To find out more about writing and designing annual reports, check out the articles below:

Get Started on Your Next Annual Report!

In this guide, we've looked at what an annual report is, what it includes and how to create one. Remember, annual reports don't have to be dull and dry. They can have an exciting and attractive design.

Get a head start on creating an annual report with the well-designed annual report templates from Envato Elements. Download as many templates as you want for one low price. You can also find attractive annual report templates for one-off use on GraphicRiver. Check them out, and start creating your annual report today!

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Annual report

In intro to business.

An annual report is a comprehensive document produced by a company each year that details its financial performance, operations, and corporate activities. It serves as a key communication tool between the company and its shareholders, potential investors, and analysts.

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• Intro to Business - 14.1 Accounting: More than Numbers
• Intro to Business - 14.7 Analyzing Financial Statements

Related terms

Financial Statements : Summarized records of a business's financial activities and condition, including balance sheets, income statements, and cash flow statements.

Shareholder : An individual or organization that owns shares in a corporation, making them partial owners of the company.

Corporate Governance : The system of rules, practices, and processes by which a company is directed and controlled, ensuring accountability to stakeholders.

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• Business Fundamentals for Public Relations
• Corporate Communication
• Entrepreneurship: How to Successfully start a New Business
• International Consulting for Small and Medium-Sized Enterprises
• Investor Relations
• Leading Nonprofit and Social Enterprises
• Principles and Practice of Public Relations
• Principles of Finance
• Writing for Public Relations

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