Usefulness of Annual Reports
Information provided by annual reports is used by investors in making decisions regarding investment. This information is used by both accounting professionals and those who are not proficient in the field.
Certain investors have gained knowledge in accountancy and they use the figures provided in annual reports before coming up with an investment decision. Others use information that is related to organization’s financial conditions and does not contain figures but only facts to make investment decisions.
Annual reports and their structures have changed over time to facilitate both kinds of investors. Now annual reports contain information about profit and loss, cash flows and overview of the finances of organizations. The length of these reports has increased as the required number of details has grown. Annual reports contain statements provided by management (Bartlett 1997). All these kinds of information were not previously a part of annual reports. Investment decisions are not only based on analysis provided by management and directors of an organization; the profit and loss information provided through annual reports is superior while making investment decisions. These statements are highly important for those who are literate in accountancy. Individuals having literacy in accountancy are investment analysts who provide information to investors on how well a company has performed and how well it will perform in future, and through this analysis, investors make their investment decisions. ...