Proceedings of the International Conference on Business Management & Information Systems, 2012
The Relevance of Annual Reports – The Use
of Annual Reports in Investment and Finance
Decisions in a Developing Country
Fatima Anwar, Saira Anwar1 and Abdul Mannan
Department of Accounting and Finance, The University of Lahore (City Campus), Lahore, Pakistan 1
Department of Computer Science and Information Technology,
Forman Christian College (A Chartered University), Lahore, Pakistan E-mail: Fatima.Anwar@hotmail.com; SairaAnwar@fccollege.edu.pk; firstname.lastname@example.org
Making an informed decision is always the toughest task for any investor, Financial Analyst or Creditor. There are certain ways which are adapted by investors, Financial Analysts and Creditors in general to make a right choice and decision which later prove itself as worthy in terms of profit and loss. There is no one criteria which are being used by various stakeholders who perform the investment and finance decisions. From market trends to stock exchange information, every individual or groups rely on their own sources and their own way of dealing with situations and making decisions. In today’s arena annual reports provides information which can be used not only for future long term decisions but can also provide short term benefits. These can also help in diagnosing the company current profile, its economic and financial performance, risks and the value it will yield to the people who will get involved with the company. Looking at the data provided in these reports the decision making process can be standardized, monitored and may also be controlled.
This study is an attempt to avail the benefits provided by annual reports and the information it has for its users. The current paper analyses the use and effectiveness of Annual reports and the help which they yield to Financial Analysts, Creditors and Investors for their decisions and how much reliance they can have on Annual reports for Investment and Finance Decisions. This study is both empirical and descriptive in nature and not only perform the statistical testing of data collected from a developing country’s (Pakistan for current case) investors, creditors and financial analysts but will suggest factors that will lead investors and creditors of developing country to make an informed decision by the use of annual reports.
The results after doing statistical analysis indicate that Annual reports is not only useful for all user categories but is also a much relied upon tool for investment and finance decisions
Keywords: Finance Decisions, Investment Decisions, Annual Reports, Financial Statements
Initially financial statements or annual reports were just the means for better accounting, data organizations and informative material and they were never considered as a part of economic decision making process. They were just made and were a mere tool for data repository, which were never used in future.
Annual reports are formed by almost every company after spending huge amount of resources and therefore the management strives for excellence and information quality provided in them. These reports are the means to promote the company by highlighting good aspects, gains in the past financial year and present the information to ensure that company is not mislead or wrongly perceived by any of the stakeholders.
Business Management and Information Systems
Annual reports are developed by the management for assisting users to make economic decisions and analyze the company, but the question remains that do the investors, financial analysts and creditors really read and utilize these reports. If they do, which aspects help them more and which aspects are ignored by them while analyzing the financial statements.
This decision making is really a tough job of these users in order to use the correct information and discard all the irrelevant...
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