What is an annual report?

Annual report (definition)

An annual report is a detailed report that shows a company’s operations and financial performance in the preceding 12 months. This information is of interest to shareholders and potential investors.

Publicly traded companies have to produce annual reports as part of their responsibilities to share market regulators and their shareholders. Companies that aren’t publicly traded may still have to produce annual reports for government regulators and tax offices.

What goes in an annual report?

An annual report for a publicly traded company typically contains highlights of the company’s activities and performance during the previous year, future goals and objectives, a letter to shareholders from the CEO or company president, an auditor’s report, and detailed financial statements. Financial information is often visually presented in graphs and tables. The annual report for a small business will be much more simple.

The financial statements – balance sheet, profit and loss statement, and cash flow statement – provide information about the company’s:

  • current financial state
  • profit or loss in its previous fiscal year
  • cash availability to pay its debts as they come due
  • earnings retained to grow its operations
  • operating ratio (OR) ratio of operational expenses to revenue generated

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This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.