The Annual report contains details on R. E. C. Inc. ’s activities for the year ending 2007. The business has, Operating, Investing and Financing activities. Stakeholders in the company include debtors, creditors, Shareholders, members of staff, Security Market Operators and the media. All these people need to be well informed on how the business of the company is being carried out, in order to determine, their future financial and economic relationship with the company. An annual report can therefore be said to be, an explanation of R. E. C. Inc.
’s financial statements for the year 2007. It will be based on the Income statement, Balance sheet, Cash flow statement, Auditor’s report, Statement on retained earning and notes to the financial statements. It is a legal requirement for the annual report to be prepared, disclosed and filed. (Albert 2002 p. 11-23) Operating activities: The events leading to the generation of R. E. C. Inc. ’s profit or loss, should be disclosed. The company’s market value should also be well explained. Sales for 2007 should be compared to, previous years’ and that of other companies in the industry.
This will help shareholders determine the future of the company, in terms of revenue generation. The debt collection period should also be well explained, in order to determine how the company is receiving cash from sales made. Corporate tax computed, accrued and prepaid should be explained to the stakeholders. Credit analysis for R. E. C. Inc. ’s should be compressive to determine the firm’s ability to repay the principal and the interest, on borrowed sums. Loaners and creditors will want to determine whether the company can service its liabilities when they fall due.
A firm’s working Capital determines its ability to run its operations without difficult. Negative cash flows should be given attention, because this shows a bad picture and the Going concern concept of the company may be violated. Reasons for borrowing should be well explained to the investors and creditors, for them to evaluate and make their own decisions. Creditors also value the Debt Equity ratio because it explains their fate incase the company goes in to liquidation. Investment Analysis: Stakeholders of R. E. C Inc.
’s are interested in, the par value of the shares and the market value of these shares. It is important for the par value as shown in the security markets, to be disclosed to the shareholders and all the third parties. This will help them in their decision making, on whether to deal with the firm or not. The market value will also determine the liquidation value of the company incase the existence to perpetuity is violated. The press needs the value of shares for Business news segment, every day and this should be provided consistently, through the Capital Market’s Authority.
The Balance sheet for 2007 will tell about the past of the company and it will also help tell the future of the company as a Going Concern. Cash flows from operating activities need to be analyzed to determine how risky the company is. Very few investors are risk takers; they want to know the stability of the Earnings per share before they make their decisions. Expected returns and earnings per dividend are of great importance to all the stakeholders, because they tell the competitiveness of R. E. C. Inc. ’s and its market value. Employees of the company also want to determine whether they can also buy shares.
(Timothy 2000 p. 23-45) Management Analysis: Stakeholders of R. E. C. Inc. ’s will evaluate the company’s executives based on the decisions they make for the company. Both short term and long term decisions, in line with the mission statement, should be disclosed. The shareholders will therefore determine whether the Board of Directors should be changed or not, at the annual General Meeting. SWOT analysis should also be detailed; this is the analysis of the company’s strengths and weaknesses given the opportunities and the threats facing the company.
This evaluates how well the management can, utilize the strengths on opportunities and work on its weaknesses to minimize the threats that R. E. C. Inc. ’s is facing. All this is information that, the members of staff, public, market regulators and media are interested in. (Mark 2001 p. 23-45) References: Albert S. (2002). Annual Reports. New York. Nerd Publishers. Mark T. (2001). Financial Accounting. New Jersey. Lakos Publishers. Timothy G. (2000). Accounting Basics. Boston. Cristal publishers.