Annual Report is a yearly report published by a company for its share holders and others who are interested to know more about its business.
In India, it is mandatory for every listed company to submit annual report to the stock exchanges (BSE and NSE). The annual report is submitted after the end of the financial year on 31st March and before the deadline on September 30.
Annual Reports are comprehensive in the information it provides to the public. It contains everything from the financial position, vision of the people who are running the business and their future plans.
Information provided in the report can give investors greater insight into the company they are invested or are interested to invest in.
While no two annual reports are the same, most include the following sections:
Annual Report Contents
- General information about the company; List of directors, Management Team etc.
- Financial Highlights
- Letter to Shareholders
- Director’s Report
- Independent Auditor’s Report
- Detailed Financial Statements (Balance Sheet, Profit & Loss Statement, Cash Flows etc)
- Management Discussion and Analysis
- Report on Corporate Governance
- Awards, Accolades etc.
Annual Reports are usually hundreds of pages long and contain a lot of information about a company and its business. For example, the 2018-19 Annual Report of Tata Consultancy Services (TCS) was 253 pages long.
Most investors cannot read the entire report, it isn’t important to read it entirely either. Reading and understanding the important segments should be sufficient (we will cover this in more detail in another article).
A stock analysis or decision on whether to buy a stock or not, cannot be based entirely on reading annual reports. When a company publishes its annual report, it’s designed to impress its shareholders. It’s the company’s point-of-view that gets presented in the report.
Investors also need to look into aspects that are not covered in annual reports like the company’s competitors, current valuation of the stock, prospects of the sector the company belongs to and more.