Consider if annual reports fulfill their intended role by analysing their function and uses.
... support from shareholders. This will ensure the stability of the company's future position. A company will try to reveal it's unrealised value through the report. This might include money tied up in fixed and current assets including buildings, stock, and equipment. Trade mark royalties may also come under this title along with the information technology a company uses. It will also aim to retain current shareholders and attract new ones. This group is one of the primary reasons a report is published and is where the uses of such reports in practice can be put. An annual report is used as an information tool by various groups who have an interest in a companies operations. The Accounting Standards Committee identifies seven user groups: The equity investor group, including current and potential investors and shareholders. The loan creditor group, this group includes sources of secured and unsecured loans and finance. The employee groups, both existing and potential. The analyst-adviser group, including financial analysts, trade unions and credit rating agencies. The business contact group, this includes customers, creditors and suppliers. Also competitors in the market will be included in this group. The government, tax authorities and those involved in the supervision of commerce are included. The public, for example, customers and other special interest groups, such as environmental protection agencies. A member of the equity investor group is likely to be a current or potential shareholder. This group are primarily interested in the risk involved with their investment and the likelihood of a return by way of a dividend. They will also asses potential for capital gain by selling shares at more then their purchase price. They will use an annual report to decided whether or not to purchase shares by evaluating the company's profitability, survivability, growth, stability, potential problems, or other factors which may affect an investment in that company. Therefore the most important aspects of the report for this group will be the financial statements. To forecast future success they may focus on the companies financial health patterns in a 10 year summary of financial figures, this statement will also be looked at by the loan creditor group. Long, medium or short-term money lenders (the loan creditor group) will use the report to ascertain whether he or she will get their money back. They will look at the information that enables them to determine whether their loans and interest attached to them will be paid on time. They will look at cash, and (depending on the length of the loan) the net realisable value of a company's assets . Investors generally like to see that current assets are greater than current liabilities by a comfortable margin. Employees will use a report to asses job security and fairness of wages. The stability and profitability of a company is therefore of greatest importance to this group. They may use an analyst-adviser groups such as trade unions to help them in their examination. Such groups are not an individual entity, for example, stockbrokers will advise shareholders. Their need for for information is essentially based on the group they are advising. Supplier uses of an annual report are similar to those of the loan creditor group. When considering whether to start or increase business with a company suppliers need to consider the future success of the firm but also sales volume and customer demand. If the customer group has a long term contract with a business they will need to be assured that the chosen company will be able t...