Whilst you get a school report every year (or maybe more than once a year), companies have to publish their own “Annual Report”, telling shareholders and other interested people about their operations and finances for the past year.
These reports often start with lots of fancy photos, graphics and impressive statements about the company followed by detailed financial information. How do you see beyond the glossy exterior and find out what you need to know about how well the company is doing, and whether it would make a good investment?
We’ll look at finances in more details at the end of October, but here are some other key sections you find in annual reports and what you can learn from them.
Shareholder Letter from the CEO (Chief Executive Officer)
This is a message from the top executives summarising the company’s activities for the year, market position (how well it’s doing in comparison to competitors), finances, and future plans.
It’s a chance for Execs to speak directly to shareholders and it can help you to get an overview of the firm and understand how well the management thinks the company is doing.
There is usually a section highlighting some of the company’s key achievements, such as special initiatives, goals achieved, or awards received by the company or its employees. This is to impress current shareholders and encourage others to invest. Here you can find some good evidence for the “Strengths” section of your SWOT Analysis (Question 3 in the Research Report) but remember to double check what they say!
This section looks at the company’s future objectives and goals, their plans for growth, and strategy on how they are going to achieve that. This is great information for the “Opportunities” section of the SWOT Analysis and vital for Research Report Question 7 looking at company growth and where they will be in 5 years’ time.
If you were writing your own school report, what would you say? As you might imagine, an annual report will present the company in the best possible light! You need to double check what they say by looking at other sources of information on the company and the sector it operates in before drawing any conclusions.