An annual report is a yearly formal record of a person, business, or other entity’s operating and financial activities. Annual reports are usually prepared for stockholders of companies as well as investors. A good annual report does only present raw data, but explains how the data points to a solid year and, accordingly, a positive future.
Aside from a summary, annual reports contain the following information:
Income statement. Also referred to as the Profit and Loss statement, this basically reflects how well the business is making money.
Cash flow statement. This basically lists the operating, investing and financing activities and other activities that explain how the operations is being paid for, where the money is going, and if there’s any being allocated for future growth.
Balance sheet. This lists the assets, liabilities, and ownership equity and reflects the current financial condition of a company.
Retained earnings statement. This not only lists the amount of earnings retained for in the last year but also explains the changes in the amount of retained earnings.
Auditor’s report. Usually external auditors are hired to ensure accuracy of financial records. Attaching a copy of the auditor’s report in the annual report gives credibility to the report.
Note that annual reports can become complex, with multiple appendices attached to each statement in order to explain or justify the contents of each. The complexity depends on how large a company and its operation is as well as the nature of the business.