Annual Report: These Are The Contents Need To Read in An Annual

Annual Report: These are the contents need to read in an annual
report
Contents of an annual report:
You should be able to find the following informations from an annual report:
Letter from the CEO
Summary of the operations-milestones, achievements, prospects.
Past Annual summary of all financial figures.
Management discussion and analysis of the performance of the company
The director’s report.
The balance sheet
The income statement
Auditor’s report
Subsidiaries, brands, addresses, registered office, head quarters etc..
Names of directors
Stock price history
Must reads in an annual report:

You do not have to read the report cover to cover. That’s not practical also. The first
few pages are colorful and it presents a non technical overview of the company’s
objective and how well it is meeting them.
The front section will probably also tell you about the company’s strategies,
products and competitive positioning. The chairman’s statement or message to
shareholders will also be included here.
The back portion of the annual report is usually filled with financial information
about the company. The real meat of an annual report is in the financial statements
and ‘notes to accounts’ found in this portion.
The balance sheet, income statements along with auditor’s comments and notes to
accounts are must reads. Apart from these, the Director’s address gives an overview
of your company’s operational and segment-wise performance, key initiatives
undertaken during the year, achievements and a financial snapshot.
The Director’s report will give an overview of the initiatives taken during the year,
other achievements, awards and a snapshot of whatever milestones the company
could achieve in the past one year.
Many items of expenditure or income may be disclosed in the financial statements
in abstract figures for which break up will be given in the schedules. There will be a
long list of schedules accompanying the balance sheet and income statements.
The management will also discuss in detail about the industry, factors affecting the
company’s prospects, impact of policy changes by the management or the
government, strengths, opportunities, threats, competitors and how well the
company tackles all this.
Other bits and pieces:
A detailed study of the notes to financial statements, allow you to go beyond the
numbers to understand some of the assumptions and accounting policies that
underlie them. For this purpose, we must refer to the notes to accounts, given as an
appendix to the balance-sheet and profit and loss account.
Remuneration given to directors and other managerial personnel, dealing with
sister concerns of the company etc may also find place in the notes to accounts.
Notes can be divided into two parts. The first part describes the basis of accounting
and presentation. It briefs you on estimates used and where foreign exchange
earnings are involved, the basis of conversion. Some of the key points of
information contained in the notes include the position of cash and cash
equivalents, collateral given to various lending institutions and investments in sister
concerns.
The second part provides information on the assets and liabilities position. Here,
related party transactions that show company’s dealings with group companies
and associates, are key sources of information.
For manufacturing concerns, the production figures assume significance. The
production figures compared with installed capacity could give you an idea of the
efficiency at which the company is operating .This information is particularly
pertinent if the company is planning further expansion
For newly listed companies, the utilization of the IPO proceeds are disclosed in the
annual report.
Since financial statements are prepared by “matching principle” an analysis of the
cash flow statement will show the actual flow of cash.
So, next time you get an annual report, look beyond numbers. The financials are
just one part of it. To get the bigger picture, consider reading and analyzing the
above mentioned points.

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