Stakeholders are parties that hold an interest in a company and its operations. Usually, these include individuals or other entities that deal with the company regularly. On top of that, it may also consist of parties that fall under the impact of its operations. Stakeholders keep a close eye on how a company operates and its activities. Usually, they make decisions based on those operations.
Stakeholders need information from a company on which they can base decisions. Usually, this information comes as written documents. For most companies, it includes the financial statements. However, companies also prepare a report along with those statements. This report does not come for every quarter or month. Instead, companies prepare it annually.
Annual reports include the financial statements along with other information. Companies prepare these reports for every year of operations. Similarly, they are significantly crucial for all stakeholders. More specifically, annual reports are important for investors. Investors can find these reports through various sources. Before that, however, it is crucial to understand what annual reports are.
What is an Annual Report?
An annual report is a written document that companies prepare for each fiscal year. As the name suggests, these reports come annually. Companies also report their operations quarterly. However, these reports do not come with an annual report. The annual report includes various parts, including the financial statements. In some jurisdictions, companies must prepare this report. More specifically, public companies must present the annual report.
An annual report presents various aspects of a company’s operations. The financial statements focus on quantitative information primarily. However, annual reports also include qualitative information with those statements. On top of that, these reports discuss a company’s operations from several perspectives. The annual report helps companies comment on their performance and present their view of operations.
The annual report is one of the most important ways for companies to communicate with stakeholders. More importantly, it helps them attract potential investors. On top of that, it also allows companies to satisfy the information needs of existing shareholders. Companies also distribute the annual report to various stakeholders annually. On top of that, companies also upload a copy of these reports on their website.
Companies prepare an annual report for stakeholders. However, not all of them may read that report. It includes two parts, a front, and a back. The former consists of graphics, photos, and an accompanying narrative. The back part contains details about finances and operations. For investors, both of these are important. However, some stakeholders may only look at the back for the quantitative information.
Why are Annual reports important for investors?
An annual report serves various purposes depending on the stakeholders. Usually, it is to help provide information. Companies consider all those needs when preparing the annual report. For investors, however, the annual report is significantly more crucial. There are several reasons why this report is important for investors. Some of those primary reasons include the following.
Reports financial information
One of the most critical aspects of the annual report is financial information. Usually, companies prepare their financial statements quarterly and annually. For the latter case, they also come with an annual report. The information provided in this report is usually more comprehensive than that presented in financial statements. For investors, this information is crucial in decision-making.
Provides insights into operations
The annual report comes with a letter from the CEO to the shareholders. This letter provides the CEO with a chance to offer insights into the company’s operations. Moreover, it can also help them clarify the state of the sectors or industries where the company operates. For investors, it is crucial in understanding the company from an internal perspective.
Offers qualitative information
Financial statements focus on quantitative information. While this information can be crucial in helping investors decide, it can also be insufficient. Usually, quantitative information offers lesser clarification for various matters. However, an annual report can satisfy their needs better. This report focuses on adding quality to the quantitative information provided in financial statements.
Enhances forecasting and predictions
Investors can use the annual report to predict future performance. Sometimes, companies may present this information as a part of this report. On top of that, investors can use the annual report to prepare their forecasts and predictions. Consequently, investors can estimate future share prices and related cash flows. This information can be highly critical in decision-making.
Provides easy access to information
The annual report is a relatively easily accessible information source for most investors. Usually, investors can find this report through several sources. The same information is not available through other means. Therefore, companies can help provide easy access to investors through this information. Consequently, investors can base their decisions on the annual report.
Ultimately, the annual report is crucial in helping investors build their confidence. It satisfies the informational needs of every investor. Based on that information, they can make several decisions that dictate their relationship with the company. The annual report helps build their trust in those decisions. Without the annual report, companies cannot communicate with their investors properly.
What are the ways investors can find the Annual Reports?
As mentioned above, the annual report is easily accessible through various sources. However, some investors may not know how to obtain them. Companies also distribute their annual reports to selective stakeholders. Beyond that, other investors must search the annual reports themselves. The five ways investors could find the annual reports are below.
Companies that prepare an annual report also put it on their corporate website. Usually, every company has a dedicated section on its website to present this report. Investors can find the annual report through that section. Usually, companies offer this information under the “Investor Relations” or similar links. Within this section, they upload their annual reports for every year.
Investors can also find annual reports through an online search. Usually, they will come across various results that present the annual report for a specific company. The first link will be the company’s website. If that is not available, searching online can also offer other sources to find annual reports. However, they must ensure to follow trust-able sources.
Investors can also find the annual report for a public company through the stock exchange. These companies must prepare this report annually. Once they do so, they must distribute a copy to the stock exchange. Investors can also find the annual report through the stock exchange website. However, not all stock exchanges may provide access to that information.
Investors can also find the annual report for a company through the mandatory filings. Usually, every company must file its annual report with an authoritative body. For example, the Securities and Exchange Commission in the US overlooks this process. Investors can contact that body and obtain a copy of the annual reports through the SEC. On top of that, they can also get other crucial information.
Some third-party sources also exist that allow investors to find annual reports. These are dedicated websites or platforms that provide access to those reports. Usually, they include these reports for most public companies. However, these sources may not provide the most recent information. On top of that, it may also exclude some companies from the list.
An annual report is a written document that provides crucial information about a company’s operations. This report includes various sections that reflect on a company’s operations over a year. Overall, the annual report is highly crucial for investors. Investors can find this report through several sources, as listed above.