FINANCIAL ANALYSIS

Financial Analysis

Financial Analysis

Identify and explain the main sections of the annual report?

An annual report is a very important document representing a detail analysis and information about the company. It helps all the stakeholders to get a good understanding about the company. Creditors, Investors, Regulatory Bodies, Central Bank, Suppliers and government bodies can take information about the company. It gives a complete picture of the company to various classes of society. The annual report includes not only the financial performance of the company, but the overall business information of the company. The main components of the Annual Report include Balance Sheet, Income Statement, Cash Flow, Financial Notes, Risk factors and Financial Highlights. In this paper, we will discuss the main components of Annual report and how they are influenced (Embrechts P., Klüppelberg C. and Mikosch T, 1997).

The first and foremost important component of the Annual Report is the Balance Sheet of the company, which is one indicator of company's strength. It shows the assets a company possess, and how these assets of the company are financed, either through debt or equity. It also shows the composition of debt and equity through which the company is financing its debt. The second main component of the annual report includes the Income Statement of the Company. It enables the reader, to know the profitability of the company. It includes both Gross and Net Profit. A reader can easily understand and analyze the sales and Expenses Company is incurring during the annual year. Third most important component of the Annual Report is the Cash Flow Statement of the company. In certain cases, Cash flow of the company is some times more important than even Income Statement or Balance Sheet of the company, because it enables the reader to know the cash in hand of the company and the real cash inflow and outflow. On the other hand, Income Statement of the Company gives figures on Accrual basis. It also determines the breakup of cash flow through investing, financing and operating activities. An investor or any other stakeholder can easily judge the position of the company by analyzing the status of its cash flow. Company generating sufficient cash flow from operating activities always produces good results. After the financial statements of the company, notes to the financial statement are very important, as the description about various components of balance sheet and income statement items are given ...