annual report

All quoted companies have a legal obligation to send shareholders annual results within six months of their financial year-end. The Reports and Accounts have to include an annual report and a set of accounts, and the information in each has to include certain elements. They also have to send out interim results.

Reports and Accounts typically contain five sections that offer hard information:

• the directors' report
• the profit and loss account
• the balance sheet
• the cash flow statement
• the auditors report

1. The Directors' Report
   This tells what the company does, who its directors are, and what their stake in the company is. It also states whether there have been any significant business or financial developments during the year, and provides a brief review of the year's trading.
2. Profit and Loss Account
   This summarises the result of last year's trading in figures. It tells what the company sold, what its costs were, how much profit it made, what the tax charge was, what was left for shareholders, and how much of this is being paid out to them in dividends and how much ploughed back into the company. It also gives comparable figures for the previous year.
3. Balance Sheet
   This provides a snapshot of everything the company owes and owns at the end of the financial year in question. It tells what its assets are and how they are financed. Where the profit & loss account tells you how the company has performed in the previous year, the balance sheet reveals its fundamental health.
4. Cash Flow Statement
   This compares the amount of cash coming into the company from trading profits, investment, more efficient debt collection and so on, with the amount flowing out from trading losses, tax and dividends. Then it adds or subtracts the cash produced by capital raising or spent on capital repayment.
5. Auditors' Report
   This tells you whether the accounts prepared by management reflect a true and fair view of affairs and meet the legal and regulatory requirements.