Why is it important for companies to publish annual reports?

Question

Why is it important for companies to publish annual reports?

Answer 1

To help the public invest in the company's share.

Answer 2

Annual reports display the profitability of any business. This is important, because if a business owner wants to get some money (like a loan), they can pull out the annual reports and show potential investors that they are solid year-after-year, and deserve an investment to grow even stronger.

In the same way, if you have an annual report and see that you are losing money every year, you can focus on parts of the business that might be causing this to happen, and turn things around. If every year your annual reports continue to show a loss, you know that maybe it is time to try something new, or make some drastic changes in the way you operate.

If you have a privately owned company, you do not necessarily have to publish these reports...but if you have shareholders, you will likely need to do so, so those with an investment (or considering an investment) in your business can see what is going on, and decide if they are making a wise choice.

Answer 3

Basically for stakeholders: employees, owners, investors, government, all relevant parties to the company need to sure they are accounting correctly for their business and this is shown in the accounts.

Accounts have differing levels of importance, as a listed company would have more stakeholders than a small sole trader. A sole trader has to pay tax, and this is based on the annual report or accounts.  A listed company has investors to think of and other more complex parties.