A manager\u2019s primary goal is to maximize the value of his or her firm\u2019s stock, and value is based on the firm\u2019s future cash flows. But how do managers decide which actions are most likely to increase those flows, and how do investors estimate future cash flows? The answers to both questions lie in a study of financial statements that publicly traded firms must provide to investors.\u00a0 Here investors include both institutions (banks, insurance companies, pension funds, and the like) and individuals like you.<\/p>\n
The annual report is the most important report that corporations issue to stock-holders, and it contains two types of information.\u00a0 First, there is a verbal section, often presented as a letter from the chairperson, which describes the firm\u2019s operating results during the past year and discusses new developments that will affect future operations. Second, the report provides these four basic financial statements:<\/p>\n