Key Concepts & Questions

Chapter 3

Reading through this chapter, I was quite intrigued when I learnt that a firms annual report are marketing documents. I never seen my companies reports this way, but in retrospect I definitely understand it. The reports were simple, with brightly chosen colours, a clean and concise set up, appealing to the eye and engaged the reader.

I never knew before that New Zealand’s end of financial year is on the 31^st of March. How interesting! I like that the author compared balance sheets to that of a persons eyes, nose and mouth. As I was looking through my own companies balance sheet, I found it relatively easy to understand, however when browsing through other peoples I found they were somewhat jumbled up, a lot different to mine and they used some similar words, some words I had never heard of. However when it all boils down to it, each firm have similar expenses, similar assets and similar liabilities, (like faces we all have similar eyes, noses & mouths)I can definitely understand how having a hard copy version of an annual report would be a lot easier to use. Taking footnote numbers, and scrolling away to hunt down those numbers, then going back to the balance sheet was tiring, and at times confusing.

I found that it was quite a bit easier to understand my companies balance sheets because they had provided the previous years financial numbers, which allowed me to compare how well or poorly they had done this year as compared to last, and it allowed me to understand where all these figured had developed from. I think that if balance sheets only provided one year (which was the current year) of financial figures of the company, it could be quite misleading.

Statement of changes in equity was difficult for me to understand because I do not fully understand what equity means.

I understand the term trust, and what it means in the world of business. I understand trust as providing a business with equity such as resources that will be used to generate future value and be able to repay its equity.

I really enjoyed that this study guide provided more than just information on our annual reports. The addition of works by experienced practitioners was quite valuable. As I learnt about Warren Buffet, I found myself really interested in knowing more, and once this assignment is submitted I’ll be hunting down his annual Chairman’s letter.

I always thought that annual reports were just a breakdown for those interested of what had happened in that particular company, on the financial side for that year. However, the statement “we should use a firm’s financial statements to help us engage with key aspects of our firm’s economic and business realities”  changed my idea, and enabled me to understand that these reports are much more than that, they should be used to help us engage and better understand what’s happening in a business. Like in chapter 1, my views are changing quite substantially from just seeing the numbers of the business, to understanding why we have these numbers, what do they mean, where did they come from, what can they tell us about that business, and what does this mean for the future of the business. I’ve found that this course has certainly got me asking a lot of questions!

Shares and dividends has certainly always been an area of difficulty for me. I’m still struggling to understand the full information. My company pays full franked dividends to its investors, which I found out means that the company pays the tax on these shares, and that the investors can claim a credit for the money paid in tax. So, I’ve learnt a little about shares, but I’d like to delve deeper into the information behind dividends to make my own assumptions, maybe even look into investing. It is an exciting world that I’m interested to learn more about.