What financial reports are included in the annual report? What are the major typ

Question

What financial reports are included in the annual report?

What are the major types of information contained in each of these reports?

What is a Form 10-K?

What information can be found in a Form 10-K document that could not be found in an annual report, if any?

Explain the importance of corporate governance to publicly-held company in relation to any interest that it has in being profitable. Justify your answer.

Start reviewing and responding to at least two of your classmates' postings as early in the week as possible. Participate in the discussion by asking a question, providing a statement of clarification, providing a point of view with a rationale, challenging an aspect of the discussion, or indicating a relationship between one or more lines of reasoning in the discussion.

Explanation / Answer

What financial reports are included in the annual report?What are the major types of information contained in each of these reports?

1. The annual report reflects the previous year business of a company. it is a source through which the interested parties of the comapany like shareholders, employees, customers, directors, etc., learns about the company and business in a relatively shorter time. Normally it is made for 12 months which is the financial year of the company.

The following financial reports are included in the annual report:

a) Income Statement

b) Balance Sheet

3) Statement of cash flow

4) Notes to financial statement

5) Auditor's Report

6) Chairman/CEO Report

Major types of information contained in each of theses reports are as follows:

1) Income Statement:

- Details of profit and loss.

- Gross profit is calculated using total revenue and cost of goods sold.

- Net profit is calculated using operating expenses and gross profit.

2) Balance Sheet:

- Details of assets.

- Details of Liabilities

- Details of shareholder's Equity.

3) Statement of Cash Flow:

- All inward movement of cash

- All outward movement of cash.

4) Notes to financial Statement:

- Facts and figures in the financial statement.

What is a Form 10-K? What information can be found in a Form 10-K document that could not be found in an annual report, if any?

a. Business: this section contains the details of business such as subsidiaries, labor regulations, kind of business, competition etc.

b. Risk Factors: this section deals with the business' risk factors and their analysis.

c. Properties: this section gives the details of the fixed assets and properties of the business.

d. Legal Proceedings: this section shows the legal proceedings by and against the organisation.

e. Market: this section shows the stock price fluctuations of the company in a simple statement.

f. Consolidated financial data: this section shows the consolidated financial data of the company. i.e., consolidated financial statements.

g. Management discussion and analysis: this section deals with the summary and discussion of reasons for the financial conditions and results of the company.

h. Forward looking statements: this gives the disclaimer for the future projections by the company.

i. Financial statements: these contains auditors' report, consolidated statement of operations, consolidated balance sheet, consolidated cash flow statements and other accounting notes etc.

j. Details of Directors, executive officers, their compensation, and other corporate governance matters are given in part 3.

Below information is not found in annual report of a company but will be present in Form 10-k

a. Legal proceedings.

b. Risks analysis.

c. Unresolved staff comments.

d. Market analysis of the company's stock.

e. A seperate section for fixed assets etc.

Explain the importance of corporate governance to publicly-held company in relation to any interest that it has in being profitable. Justify your answer.

Corporate Governance in today's world is all the more important given the history of accounting scandals of major US firms. Had proper Corporate Governance mechanisms being put in place and followed in principle, this would not have happened.

Corporate Governance acts as a check for Company's Management to always act in the nest interest of all stakeholders i.e. Investors, Suppliers, Employees, Customers etc. Effective Corporate Governance principle make sure that Profit is not the only criterion to judge Management capability. Capital allocation decisions, capital distribution decisions, audit committee, remuneration committee etc. make sure that Company is acting in the best interest of all.

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