Analysing COmpany's Market, Productive and Financial Performance - Essay Example

? Usefulness of a company’s annual report and accounts in understanding and analysing its market, productive and financial performance Tutor Date Due Introduction An annual report is an article prepared yearly by companies premeditated to depict fair and spot on view of the company’s annual recital. It also gives an audited statement of finances primed in accordance to the company’s regulatory requirements and edict. Other non-financial information is also incorporated. The report should be ample and show the company’s activities throughout the foregoing year. Annual reports are anticipated to confer to stakeholders and other engrossed persons information on company’s actions and monetary presentation. Almost every sway requires annual reports to be prepared by companies and be disclosed. Some even recommends that the annual report be filed painstakingly at the registry of the company. In case the company is among those on a stock exchange’s listing then the report have to be prepared at a more recurrent intermission depending on the regulations of the stock exchange concerned. A typical annual report should contain the following: accounting policies, cash flow statement, balance sheet, profit and loss account, financial statement, director’s report, chairperson’s statement, operating and review of finance, and auditor’s report. Other information that may be of apprehension to stakeholders may also be incorporated. For instance, a report on company social accountability or operations for industrialized firms report may be included for companies with social or environmental sensitive operations. For superior companies the annual report is a high annotation periodical that is glossy and vivid. The information provided in the report is useful to investors in order to comprehend the company’s prospect trend and its financial situation. Usually, financial statements are compiled in conformity with IFRS and the domestic legislation, as well as domestic GAAP. For instance, the U.S. Securities and Exchange Commission receives Form –K, a comprehensive version of the annual report. In case the company is held publicly, it submits a ‘wrap report’, a much supplementary narrow version of the annual report. A balance sheet also referred to as the statement of financial position abridges the financial balances of a company. The assets, company equity, and liabilities are cataloged as of a specified date mostly at the conclusion of the financial year. The only statement that can apply at a solitary point in the occasion of business is a balance sheet out of all the financial statements. In the annual report a balance sheet has to be incorporated to illustrate in a snapshot a company’s financial situation. (Jenster 2001) An income statement also referred to as the profit and loss account or revenue statement indicates how the returns of a company transform into net income. This is achieved when all the expenses and revenue have been worked out also identified as bottom line or net profit. The revenues renowned for a particular period are displayed, and the expenses and cost incurred on this revenues, including taxes and write-offs. The income statement shows the shareholders whether the company prepared or lost money for the duration of the period reported. The companies required to publish their annual report do not always fabricate an income statement, instead a similar statement is produced that replicates the funding foundations, compared against administrative costs, program operating cost, and other in service commitments. A statement of cash flow is a fiscal statement showing adjusts in accounts of balance sheet income impinge on cash and cash comparables. The analysis is broken down into operating, financial activities and investing. Basically, the cash flow statement is apprehensive with cash flow out and into the business. The statement incarcerates both the existing operating fallout and supplementary changes in the balance sheet. Cash flow statement is helpful in formatting a company’s short-term viabilities, especially its capability to pay bills. The director’s statement should be included in the annual report as he is responsible for the shareholder’s financial statements. Preparation of the financial statements and the annual report is the responsibility off the director in accordance with Companies Act (1985/9), which gives him stewardship of limited companies. He is also required to put out accounts showing fair and true view of the financial position of the company. The accounts are then sent to all shareholders, debenture holders, and to the registrar of companies. This should be done within seven months for public companies and within ten days for private companies. The director chooses an appropriate accounting policy while preparing the financial statements then applies them constantly. Prudent and reasonable estimates and judgments are then made by the director. Confirmation of the compliance of the prepared financial statements to the regulatory requirements is also done by the director. He is also responsible for proper account books keeping that divulge with levelheaded precision whenever the company’s financial position and to allow them to certify that the financial statements are primed in accord to the accounting standards generally accepted by the Companies Act (Flieg 2008). An annual report is vital when analysing the market as it helps in formatting the charisma of a market and understands its embryonic opportunities and pressure as they show the flaw and potency of the firm. A market scrutiny studies the dynamics and the magnetism of an exceptional market within a particular industry. Market analysis is part of the industry analysis and global environmental analysis in turn. The company’s strength, opportunities, threats and weakness can be celebrated through these analyses. Sufficient business strategies of a company can also be defined with the help of a Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis. Market analysis is used to enlighten a firm’s setting up activities, especially about decisions of purchase, inventory, workforce contraction/expansion, capital equipment purchase, facility expansion, promotion activities only to mention but a few. The basis for differentiating market analysis is called market segmentation. Differentiation is imperative in that there is dissemination of consumption, existing due to escalating competition on the products offered. More entity services and products are asked for by customers who are better well-versed about the assortment of merchandise than before. As a corollary, market segmentation is obligatory. A great deal of market research is included in segmentation, lots of market acquaintance is requisite to fragment the market. In order to characterize the relevant market, market structure’s research and processes are done. The ‘relevant market’ is considered an essential element of the entire market, where the company spotlights its activities. Therefore, a market segmentation or classification must be done in order to classify and identify the relevant market (Sarah 2009). The dimensions of market analysis is outlined as; current and future market size, market profitability, market growth rate, industry cost structure, market trend, distribution channels, and the key success factors. Market size is appraised based on probable sales if the product use were extended and the current sales. The annual report provides information on company’s financial data and customer survey that can be used to determine the market size. Market growth rate helps to extrapolate chronological data into the prospect. This can be estimated by studying the growth drivers like sales growth and demographic information in harmonizing products. Market profitability can be used to estimate the difficulty if money making in the market. The factors that manipulate the market profitability are: buyer power, barriers to entry, supplier power, rivalry among firms in the industry, and threats of substitute products. The cost structure of an industry assists in devising strategies to build up a competitive lead. Variations in market trends are vital as they are habitually the font of new prospects and coercions. The germane trends are dependent on the industry, though some paradigms include demand for variety, alteration in sensitivity of the prices, and prominence level on support and service. Elements of the key success factors are essential for the firm to attain the marketing objectives. Examples of these factors are: unique resource essential access, economies of scale achievement abilities, distribution channels access, and technological progress. Company productivity is the competence of its production. This is the ratio of the production output to the inputs. Productivity measure is the total output per unit of the total input. Details provided in the annual report helps in measurable form of productivity by operationalization of its concepts. A set of production models is used to operationalization, that is, a numerical idiom of the production procedure based on the data of production. High productivity’s benefits are manifold. Productivity growth improves the living standards at the state level as the people’s ability to buy goods and services improves with increase in real income. A good annual report shows that the company can its productivity obligations to shareholders and customers and still be competitive (Ward 2002). A financial performance is the prejudiced assess of how well a company can utilize assets from its prime mode of business and produce revenues. This term can also be used as an all-purpose measure of a company’s overall financial fitness over a specified period of time. The annual report of a company can be compared to another from a similar company within the same industry or sectors in aggregation to estimate the company’s financial performance. A variety of ways of measuring financial performance exist, but these have to be taken in aggregation. Line items like operations revenue, operation’s cash flow, or operation income, and the total sales unit. In addition shareholders may wish to glance deeper into the annual report’s financial statement and try to find margin augmentation rates or any deteriorating debt. Conclusion The annual report analyses the company’s present and prospect health. For instance, the report that was published by the British American Tobacco portrayed that the company is a strong performer. The company has benefited from success though hasty growth. The company bears no debt, hovered for prospect success. References Flieg, Thomas, 2008, Company analysis Investment advice on United Utilities PLC, GRIN Verlag GmbH. Jenster, Per V., and D. E. Hussey, 2001, Company analysis: determining strategic capability, Wiley. Sarah G. and Chris H., 2009, Integrated Company Analysis, Wisconsin School of Business. Ward, John, and Joe Peppard., 2002, Strategic planning for information systems,3rd ed., Wiley. Read More