Annual Report Analysis

2843 words - 12 pages

Annual Reports issued by the company to its shareholder on yearly basis, which includes minute information about the company. It includes the balance sheet, Profit & loss A/c, Auditor’s Report, Director Report, Future plans & much other information about the company.
The Annual Report could be broken down into specific parts:
1. The Director’s Report
2. The Auditor’s Report
3. The Financial Statements
4. The Schedules & Notes to the Accounts

The Director’s Report
The Director’s Report is more important part of the Annual Report; it’s submitted by Directors of the company informing the performance of the company under their directorship
• It dictates the opinion of directors on ...view middle of the document...

They also required reporting any change in the accounting principle or any increase or decreasing in profits.

Auditor’s Report could take as authenticated & investor can trust this information. Although there could be huge difference between Auditor’s Report & Director’s Report.
Taking Example, Letz take ABC Company for the financial year 20xx & their Annual Report entails Director’s Report & Auditor’s report as follow-
Auditor’s Report
As the year ended March 2oxx, the accumulated losses exceeded the net worth of the company & company has suffered huge losses in current financial year. In our opinion company is a sick company.

Director’s Report
This financial year has not been favorable for the company because of bad economic condition & political instability. Because of recession industry had faced tough time which is caused of losses this time. High inputs cost hampered the revenue as well as operation. Your Directors are confident that coming financial year will be year of boom for the company.

Here auditor’s calls the company sick where as directors are optimistically defending the poor performance of the company

Financial Statement Analysis

The published financial statement Analysis consists of Balance sheet as the end of accounting period, Profit & loss A/c also cash flow statement analysis. This gives the detail financial analysis of any company.

Balance sheet
It gives the detail financial position of the company on a particular date. It includes Company Assets as well as company Liability.

• Sources of Funds
A company raises fund from the public to expand their business operation, to procure working capital and to fund the business. Company can raise funds from shareholders in primary market or company can take a loan.
a) Shareholder capital- It’s the funds that a company from its share holder by issuing shares. Shares can be issued in following ways- Private Placement, Public Issue, Rights Issue, and Bonus Shares.
b) Reserves- Reserves are profits accumulation by the company. These are retained not distributed. Company can have two kinds of reserve – capital Reserve & Revenue Reserve.
c) Loan- These are the debt taken by the company to fund its future operation as well as it work in capital. It’s of two types- Secured Loans & Unsecured Loans

Fixed Assets
Fixed assets are assets for which company is owner & use in its business and to produce goods. Typically it could be machinery & land. They are not for the purpose of resale and it comprises of land, buildings i.e. offices, warehouses and factories, vehicles, machinery, furniture. Every company has fixed assets the nature or kind of fixed assets vary from company to company. A manufacturing company’s major fixed assets would be its factory and machinery, whereas that of a shipping company would be its ships. Fixed assets are shown in the Balance Sheet at cost less the accumulated depreciation. Depreciation is based on the very sound concept that an...

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