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In an annual report, who writes the letter to shareholders and what purpose is served by the letter?

Question:

In an annual report, who writes the letter to shareholders and what purpose is served by the letter?

Financial Accounting

Financial accounting provides a framework that is utilized by organizations to prepare and present financial reports. Financial reports are important as they provide accounting information that various stakeholders require to make business decisions. Financial reports must be prepared and presented using accepted standards so as to ensure they are relevant and reliable.

Answer and Explanation:

A letter to shareholders is normally authored by the top executives of a given organization. The letter is usually found at the beginning of an annual report. The purpose of the letter is to ensure that the shareholders are provided with a general overview of the financial operations of a given company regarding a given accounting period. Generally, a letter to shareholders of a company addresses:

  • An overview of an organization's financial results
  • The current position of an organization in the market
  • Some organizational plans
  • Specific events such as stock price changes over the year.

Learn more about this topic:

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Role of Financial Accounting in Management & Decision Making

from Accounting 201: Intermediate Accounting I

Chapter 12 / Lesson 1
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