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9 Parts Of The Corporate Annual Report

Reading an annual report can be a daunting prospect if you dont know exactly what
youre looking for and where to find it. The good news, however, is that most reports are now
standardized around a common model of nine key parts; this organization makes it easy to
review any companys annual report after you get the hang of it. Here are the nine parts,
generally presented in the following order:

Part#1. Letter From the Chairman: The letter from the chairman of the board is the
traditional place for a companys top management team to explain what a great job it did
during the preceding year and to lay out the companys goals and strategies for the
future. The letter also is a great place to find apologies for problems that occurred during
the year, which may or may not have been solved. Oops!

Part#2. Sales and Marketing: This section contains complete information about a
companys products and services, as well as descriptions of its major divisions and
groups and what they do. When reading this section, you should be able to figure out
which products are most important to a company and which divisions or groups are most
critical to the companys success.

0Part#3. Ten-year Summary of Financial Results: If the company is at least ten years
old, its annual report contains a presentation of financial results during that period of
time. This section is a terrific place to look for trends in growth (or non-growth) of
revenues and profit and other leading indicators of a companys financial success
.
Part#4. Management Discussion and Analysis [MDA]: This section is the place where
a companys management team has the opportunity to present a candid discussion of
significant financial trends within the company during the past couple years.

Part#5. Letter of CPA Opinion: To be considered reliable, a companys financial
statements have to be reviewed and audited for accuracy by a Certified
Public Accountant (CPA). In this letter, a CPA firm states any qualifications that it has
with the companys financial statements. These statements can have great bearing on
the reliability of the data or of managements assessment of it.

Part#6. Financial Statements: Financial statements are the bread and butter of the
annual report. This section is where a company presents its financial performance data.
At a minimum, expect to see an income statement, a balance sheet, and a cash-flow
statement. Be sure to watch for footnotes to the financial statements and read them
carefully. You often find valuable information about an organizations structure and
financial status that hasnt been publicized elsewhere in the report. For example, you
may notice information on a management reorganization or details on a bad debt that
was written off by the company.

Part#7. Subsidiaries, Brands, and Addresses: Here you find listings of company
locations domestic and foreign as well as contact information, brand names, and
product lines.

Part#8. List of Directors and Officers: Corporations typically have boards of directors
senior businesspeople from both inside and outside the organizations to help guide
them and to provide a broader view of markets and business environments than whats
seen by internal managers. Officers include the president, chief executive officer (CEO),
vice presidents, chief financial officer (CFO), and so forth.

 Part#9. Stock Price History: This section gives a brief history of the companys stock
prices and dividends, showing upward and downward trends over time. Included is
information on a companys stock symbol and the listing stock exchange for example,
the New York Stock Exchange (NYSE) or NASDAQ.

If you want to read a companys annual report but cant find it, you can go online. With the help of
online search engines, finding a companys annual report is easier than ever. Many companies
also have Investor Relations pages on their Web sites where you can find copies of annual
reports and quarterly filings with the Securities and Exchange Commission. For example: in
2006, General Electric created an interactive annual report on its site. You can check it out
at [here]. The site even features a video of the Chairman of the Board and the CEO talking about
how theyre going to build a better company.

Analyzing The Annual Report

An annual report is the best tool that the public has to review the performance of a
company. Most annual reports contain plenty of useful information. But now that you
have all this terrific info, what should you do with it? I thought youd never ask! You can
analyze the information in a report to get a sense of the near- and long-term health of a
firm. Here are some definite musts when it comes to reading and analyzing an annual
report:

Review the companys financial statements and look for trends in profitability,
growth, stability, and dividends.
Read the report thoroughly to pick out hints that the company is poised for
explosive growth or on the brink of disaster. Places to look for such hints include
the letter from the chairman, the sales and marketing section, and the management
discussion and analysis. Of course, it also pays to keep an eye on the company through
the business press and analyst reports. (For some tips on recognizing an impending
disaster, see the upcoming sidebar).
Carefully read the letter of CPA opinion. Be sure that the firm agrees that the
companys financial statements are an accurate portrayal of its financial reality.
Carefully read any footnotes to the financial statements. These footnotes often
contain information about company assumptions that can be critical to a full
understanding of the financial statements.

7 Deadly Warning Signs On An Annual Report

Annual reports consist of equal parts marketing glitz, feel-good platitudes, and hard
financial data. After you get past all the hype, plenty of interesting data is just waiting to be
viewed and analyzed. As you review the data in an annual report, stay on the lookout for
the following seven deadly warning signs:

Sign#1. Revenues Stagnant or Falling: By comparing a companys revenues across

two or more years, you can get a sense of how fast its revenues are growing. You also
can see whether revenues are likely to continue to trend upward in the future. When
 revenues stop growingor, worse, begin to fallthis is a major warning sign of trouble
within the organization. Stagnant or falling revenues can be the result of all kinds of
problems: poor product quality, increased market competition, or internal management
problems, to name a few. You have to decide whether this change is a one-time
aberration or a trend thats going to get worse before it gets better. To find out more,
search for articles in the financial press that discuss the company and its prospects, as
well as prospects for the industry as a whole.
Sign#2. Earnings Per Share Inconsistent With the Companys Profit: The value of a
companys stock is to some extent based on the firms profitability and the number of
shares in the hands of investors. So, if profit increases 15 percent from one year to the
next, you may expect the earnings per share of stock to also increase by 15 percent. This
wont be the case if the company dilutes (reduces) the value of the stock by issuing more
shares during the course of the year. If earnings per share are lagging behind the
companys profitability, raise the red flag because this requires further investigation. Be
aware, however, that stock price frequently is affected by things that have nothing to do
with the business itself. For example: institutional investors, concerned about a recent
announcement from the federal government, may pull their investments out of the sector,
driving the price down.
Sign#3. Indications of Financial Distress: A company can have phenomenal growth in
sales and profit but still go out of business. Have you ever heard someone who went out
of business lament that he or she was a victim of his or her own success? As odd as it
sounds, it can happen. If a company isnt solvent in other words, it doesnt have
enough cash in the bank to cover its current liabilities its in trouble. Run some
numbers on companies of interest specifically, a quick ratio and an acid-test ratio to
see whether theyre solvent. If the results are marginal and the trend is downward, the
ratio doesnt bode well for the future.
Sign#4. Unusual Gains or Losses: Although every company goes through natural and
regular business cycles during the course of months or years, unusual gains or losses
can be red flags deserving of your attention. Unusual gains or losses are to be expected
from time to time, but they should be just that unusual. Ongoing unusual gains or
losses are cause for concern because they indicate a fundamental problem in the
companys ability to manage its operations and finances.
Sign#5. Profit Ratios Falling: Because profit is the best measure of success for many
companies, growing or, at minimum, maintainingprofit ratios is an important goal of
management. If a companys profit ratios are falling from year to year, the financial health
of the firm is in clear jeopardy. Something in the company is broken and needs to be
fixed.
Sign#6. Adverse Auditor Opinion: For the most part, the letter of CPA opinion is a
perfunctory exercise that confirms that a companys financial statements are accurate.
Occasionally (today it happens more often because of Sarbanes-Oxley), however, a CPA
firm takes exception to a companys financial results and issues an adverse opinion. Pay
close attention to the letter of CPA opinion. Watch for words such as fairly present
(good) or adverse opinion or reservations (bad).
Sign#7. Disconnect Between Narrative and Financials: If an annual reports narrative
doesnt match up with the realities of the companys financial position, you can bet that
the companys spin doctors are in high gear. The chairman may go on and on about what
a great job the company did in a tough business environment, and about the tremendous
prospects for the company in the future. But if the leading financial indicators are pointing
in a different direction, theres more to the report than meets the eye.
As on 31st March 2016, the Company had the following subsidiaries:
1) Titan TimeProducts Limited, Goa (TTPL)
2) Favre Leuba AG, Switzerland
3) Titan Watch Company Limited, Hong Kong and
4) Titan Engineering and Automation Limited