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First Assignment - Finance & Accounting

Company annual reports provide information on a company's operations, finances, and performance to help shareholders make investment decisions. Managers can use the information to develop departmental goals and budgets, measure the impact of initiatives on profits, and identify areas for cost optimization.

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Richa Singh
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29 views

First Assignment - Finance & Accounting

Company annual reports provide information on a company's operations, finances, and performance to help shareholders make investment decisions. Managers can use the information to develop departmental goals and budgets, measure the impact of initiatives on profits, and identify areas for cost optimization.

Uploaded by

Richa Singh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Question - What type of information can be extracted from a company’s annual report and

how can managers use it to develop goals and objectives for their departments?

Response

Company Annual Reports basically defines the company’s operations and financial
conditions so that current and potential shareholders can make informed decisions about
investing in it.

From Company’s Annual Report, following information can be extracted :

1. These are documents which provides a broad overview of company’s activities and
performance over the course of the year, as well as reflection on its general business
environment, such documents are called Letters to Shareholders which is written by
CEO or President of company to its key shareholders of the company.

2. Secondly, we can understand the company’s performance through detailed analysis


report conducted by its executives known as Management Discussion & Analysis
(MD & A).

3. Thirdly we can have the holistic view of financial health of the company through
Audited Financial Statements which covers The balance Statement, The Cashflow
Statements, The Income Statement and The Statement of Changes in Equity

3a. The Balance Statement: The balance sheets reflect the company’s assets, liabilities,
and equity. Its prepared once in year. It is used to get the idea of the type and value of the
company’s assets, the amount and repayment dates of company’s liabilities, and the net
worth of the owner’s equity investments.

3b. The Cashflow Statement: It reports on the various sources of cash (cash from
operations, cash from borrowing, cash from selling assets, cash from raising equity
investments) and the various uses of cash (operating losses, repaying debts, buying assets,
paying dividends)

3c. The Income Statement: It summarizes all the transactions over a one-year reporting
period and reports on their overall effect. The net difference between sales revenue
generated and the total of all expenses is the net income and profit of the company for the
year. Income statements measures the past income, so it is used by investors and creditors
to make informed decision about how much company is going to make in future years.

3d. The Statement of Changes in Equity: It provides information on how the equity
changed on balance sheet from previous year to the current year. It helps us to understand
the retained earning which represent the income made on the behalf of owners that has
been not distributed to them by the way of dividend. It also shows the changes in the
capital stock from the previous year to current year, properly due to issuances or
retirements of capital stock.
Through many ways Company Annual Report helps the managers i.e., one could be
measuring the impact of their efforts to the company’s bottom line through looking at income
statement and noting the direct expenses related to the revenue for that period.

For example, if HR department hire the M & A Strategy Head worth of $120,000 per year.
Did his/her hiring resulted in targeted profitable merger & acquisitions for the company.

Company Annual Report helps the managers to determine and plan the budgets from
financial statements of their respective department. By breaking down the team’s work into
detailed set of deliverables during budgeting process will align the manager to track the
spending against estimated expenses and when required, pivot the project management
strategy to ensure tasks are completed on time and on budget.

From annual company report, mangers are able to see their company expenses line by line on
both the income and cash flow statements which can help them to know the areas of cost
optimization and its impact on company’s bottom line. Managers assess the balance sheet and
cash flow statement which provides micro insight on cost to company that can be mitigated
through assessing the growth plan as per the mission statement of the company and strategic
performance indicators such as Just In time production, Six sigma and other control
measures.

It also supports to gain the knowledge of the organization’s past and present financial
performances which is crucial to sound decision making; Deciding financial KPIs or key
performance indicators, such as gross profit margin, working capital and sales target etc., will
equip manager to understand the company’s financial health and their team contribution to its
strategic objectives.

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