There are various performance measurements including those that are identified through financial ratios as well as those which are generated with the help of management accounts. Whatever the source the nature and use of the information generated with the help of both these sources provide a critical insight into the overall historical performance of a firm. The assessment of budgetary and cost management accounting will provide an insight as to how the firm is meeting its internal targets whereas financial ratios may provide a broader picture of the overall performance of the firm.(Fabozzi & Peterson, 2003).
Reporting of Corporate Governance issues has recently attracted a lot of attraction and firms besides communicating with their stakeholders in other forms also use financial statements as a tool to communicate their performance against corporate governance goals. Studies have indicated that the decisions of the investors also depend upon how the firm implements its corporate governance. (Chalevas & Tzovas, 2010). Thus it is important that financial statements must provide a clear and concise description of the firm’s performance in terms of its corporate governance efforts.
Annual reports provide important information to the shareholders as such the influence of annual reports on stock market is significant. Since the annual report provides detailed information on the financial performance of a firm for the year, investors therefore make their decisions based on the information contained in the financial statements. Further, information provided in the financial statements can also help to detect fraudulent financial reporting made by the firms.( Kaminski, Wetzel & Guan, 2004)
Financial ratios provide a critical assessment of the overall performance of a firm over the period of time. It is however, critical to note that financial ratios can either be analyzed through performing trend