Annual Report

The company annual report is the most commonly employed means for publicly-held companies to communicate financial and other information to their shareholders. The term annual report is used to refer both to the Annual Report to Shareholders, required when new directors are elected at the annual meeting, and to Form 10-K, a detailed reporting of financial information provided on an annual basis to the SEC and shareholders. Both types of annual financial report are required by SEC regulations; some companies combine the two, including the Form 10-K information within the Annual Report to Shareholders itself.

Annual Report to Shareholders

The Annual Report to Shareholders is often glossy and slickly produced to promote the company and its performance for the benefit of current and prospective shareholders. The attractive, easy-to-understand brochure typically offers generalized information and includes pictures and summary reports rather than a substantial amount of raw financial data. Magazine-style paper, numerous photographs, and charts offer visual interest.

Form 10-K

This SEC-required financial annual report includes a detailed accounting of company transactions and significant operational events. The most significant parts of the Form 10-K are the income statement, cash flow statement, and balance sheet.

• The income statement, also known as the profit and loss statement, is an in-depth explanation of how the company’s annual net income was derived, often including revenues received, costs and expenses incurred, write-offs, depreciations, and amortizations, and tax liabilities over the preceding year. A simple method of deriving an income statement is simply to subtract total expenses from total revenues; this, however, can produce less accurate results. In most cases, companies subtract yearly operating expenses from the total amount of gross profit and then figure in other revenues and expenses including taxes to derive a final income statement figure.

• The cash flow statement provides an overview of the company’s operating, investing, and financing activities over the preceding year, giving investors insight into the current liquidity and ability to meet present and upcoming financial obligations. It is intended to provide information about the ready cash available for company use, and as such does not include information on long-term assets or real property.

• The balance sheet is one of the oldest accounting reports in existence, and for good reason. It summarizes all available financial information and provides an accurate and complete picture of the company’s fiscal health and viability. By listing assets, liabilities, and ownership equity at a specific point in time, the balance sheet offers a quick, at-a-glance overview of the company’s financial condition.

Form 10-K typically features a financial analysis and forecast for projected earnings as well. Since it is a required public company annual report, Form 10-K is considered a public document and is available for review online at the SEC website.

The annual company report offers the chance for businesses to promote themselves within the marketplace through carefully designed materials intended to highlight the positive aspects of the company’s performance. Form 10-K is especially important, since it provides the documentation for claims made in the Annual Report to Shareholders regarding the company’s current performance and potential for growth in upcoming years.
Tim Ord
Ord Oracle

Tim Ord is a technical analyst and expert in the theories of chart analysis using price, volume, and a host of proprietary indicators as a guide...
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