Importance of Annual Reports and Accounts - Essay Example

? Importance of Annual Reports Importance of Annual Reports and Accounts Background For a company owning a worth business in any big stock market always have a tool to analyze its performance. The tool could be like an annual report which deliberately assesses a company’s fiscal health, financial status and market position within any specific period (Thomsett, 2007). Annual reports hold a great importance for organization, especially when the organization is owned by multiple owners or is a public limited firm (Thomsett, 2007). To develop the prospect of the company there is a need for a document like an annual report which gives year after year information about the company performance and growth tactics (Thomsett, 2007). There are different reasons of why enterprises give importance to annual reports. Some of the reasons include clean market analysis, comparative financial assessment and productivity analysis which is no other possible if there are no annual reports to compare. It has been that in markets where there is a major population of investors and share holders then enterprises come out regularly with the activity of reporting (Stittle, 2003). Enterprises know that by announcing their financial health (annual report) publically, they are able to connect to their shareholders, distributors and investors, which is very important for both growth and expansion of the business. Meanwhile, annual reports also assess market position as by expressing financial numbers the feedback of market (consumer, investor, shareholder and competitor) is testified and generated (Stittle, 2003). This study is going to access the importance of annual reports in terms of market analysis, productivity analysis and financial health assessment. The study will focus on Tesco, a giant retailer company of UK in order to better understand the importance of annual reporting (Flack, 2007). Tesco and Annual Reporting System Tesco being a global retailer company holds a comprehensive reporting system. The company operates in more than 10 countries across the world, for which it has to keep a view on its global performance level. The annual reports of Tesco serve the same purpose as they provide information of what company has achieved in the previous times and what it aims for the future coming years (Tesco, 2012). Generally enterprises use annual reports to express three major types of information and that are market information, financial information and information related to productivity. Tesco’s annual reports also hit the same purpose as they project information of market competencies, company’s fiscal growth and revenues with respect to output levels (Thomsett, 2007). Tesco’s Annual Reports on Market Analysis Tesco’s annual reports talk about the market situation in which the company operates. The reports indicate different market segments, those in which Tesco is successful and those where the company sets back. There is a summarized overview of different business constraints which Tesco highlights in its annual reports. Constraints include trading levels, profit and loss statements, revenues of a particular fiscal, growth, number of employees working, and number of stores operating in one particular fiscal. By giving the overview of all such constraints, Tesco is able to analyze its present market situation (Tesco, 2012). The report comes out at the end of each fiscal giving an overview of complete market statistics. This enables managers to assess present market in terms of future growth prospect. From Tesco’s annual reporting system it can be said that annual reports play a decisive role in market analysis. By having such event based information as in Tesco’s reports, the company is able to compare its past market with the relativistic present market (Tesco, 2012). Actually the reports are projections of periods allowing the planning to make true real assessment. This helps in creating market picture, which shows that how much there is stability and in which areas the company has to mainly focus for the coming periods of time. According to Tesco annual report (2012), the company showed a trading profit of ?2,480 billion in UK and similarly in Asia the number reduced to ?737. This highlighted more stability of Tesco in UK market than in Asian market and prepares the company to address its Asian continental business. Projecting this type of useful information is part of Tesco’ annual report documents, as this is for the help of planning administrators (Tesco, 2012). Tesco’s Annual Reports on Financial and Productivity Analysis On general companies launch annual reports in order to leak out their financial progress which is one reflection of financial health status. One of the aims of annual reports is to bring the investor close to enterprise’s prospect (Tesco, 2012). This aim adjusts useful financial information in annual reports which is essential for both the company administrators and for outsiders (investors, shareholders). By the help of such numeric information, the strategists are able to analyze a company’s financial health on a particular fiscal. Tesco being a multinational retailer stands with the same objective in its annual report system (Thomsett, 2007). The company utilizes its annual reports just to bring out useful financial information. Tesco’s reports include information like sales rate, profit rate, growth rate or revenues for a particular fiscal which are sufficient to indicate the financial status of the company within in the same period. This helps Tesco’s managers to understand the company’s financial health and status which is inevitably important to understand the financial performance of the company within a specific period (Tesco, 2012). According to Tesco annual report (2012), company recorded sales growth of 7.4% with profit growth of 1.3% respectively (Tesco, 2012). The similar report projected Tesco’s capital growth of 12.9% which was in comparison to 13.9% of the year 2011. This type of information is enough to reflect the financial performance of the company, which is also essential to access the future growth margins of the company (Tesco, 2012). It is to be obvious then when companies grow in terms of capital and expenditure they are showing good productive levels (Stittle, 2003). Annual reports play a decisive role in this respect as they project the key highlights of the company including new projects, day to day customer experience, employees stability and investors engagement, which are enough elements to understand the growth rate and productivity (Stittle, 2003). The same goes out to Tesco as it includes all the relativistic information which is necessary to evaluate growth levels. According to Tesco annual report (2011), the company projected its future investment plans more specifically in the UK retail market, which is showing significant growth and expansion in the recent times. The report highlighted Tesco’s investment plans in the clothing section which showed that the company had a good productive margin in the clothing sector (Tesco, 2011). From above analysis it can be said that Tesco believes in the annual report system, a system which is effective in presenting useful information. This information is further utilized by Tesco managers, in respect of market evaluation, financial assessment and productivity analysis (Tesco, 2011). The report system prepares Tesco for the future business prospects and hence is an important part of company’s assistance (Tesco, 2011). Conclusion There are different reasons of why annual reports are important to enterprises. Some of the reasons are clean market analysis, comprehensive growth assessment and comparative financial evaluation, which are helpful to prepare future plans for the company (Stittle, 2003). Annual reports mostly include three types of information, market information, financial information and information related to growth and productivity. By general assessment of the reports strategists are able to understand overall performance of the company on a particular fiscal (Thomsett, 2007). Tesco an international retailing company also operates on annual reporting system. The company comes out deliberate with a year of year reporting where information is mostly based financials, market status and growth of the company. This type of information is important to both Tesco managers and investors as they have the idea on company’s real time progress by accessing the annual reported documents (Tesco, 2012). Hence it is to conclude that annual reports hold a major importance for an organization, especially when the organization is on the international grounds and requires a comprehensive tool of expression like annual reports (Tesco, 2011). Reference List Flack, E. (2007). The role of annual reports in a system of accountability. Sydney: Centre of Philanthropy. Stittle, J. (2003). Annual Reports: How to Deliver Your Corporate Message to Stakeholders. Burlington: Gower Publishing, Ltd. Tesco. (2011). Annual Report and Financial Statements. Cheshunt: Tesco. Tesco. (2012). Annual Report and Financial Statements. Cheshunt:Tesco. Thomsett, M. (2007). Annual Reports 101: What the Numbers and the Fine Print Can Reveal about the True Health of a Company. New York: AMACOM. Read More