Question

Explain the annual report and the information it contains. Why is the annual report so important to investors? Give two examples and explain the importance of the information.

Answer 1

Informations which are contained in the annual report are consisting of balance sheet along with the income statement along with the cash flow statement and statement of changes in equity.

Balance sheet will be providing the company's Assets and liabilities information and it will also help the investor to understand the long-term perspective of the company, whereas income statements will be providing the the income and expenditure of a company within a short span of time and it will be helping in finding out the current year profits and expenses of the company. One can utilise the income statements in order to find out the liquidity of the company

Cash flow statement will be providing statements of changes in the cash flow and it will be helpful in finding out the operating as well as interesting as well as financing cash flows of the company.

Statement of the changes in equity will be helping in finding out the net worth of the company as well as equity shareholders structure of the company and use of its retained earning.

Annual report is important for the investor because it will help them finding out the current position of the company and long term solvency of the company so it will be helpful in various investment related decision making for investors

It can be for exampled through-

A. When there will be a high debt in the company it will be risky for the investor in the long run

B. When there would be a higher cash in the books of the company, then the company will be cash rich and it will have liquidity to make various decisions.