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A direct and effective reporting system is typically deemed a vital advantage that a company must possess in order to maintain proper performance. However, while the significance of annual reports for a company is self-explanatory since it allows viewing the key performance issues, its significance for investors and other stakeholders might not seem evident at first. Though annual reports could appear to be a chore rather than a useful tool for investors and other stakeholders to examine, they contribute to transparency in the companys actions and allow for communicating essential changes to key stakeholders.
Annual reports are vital in promoting the policy of transparency and financial honesty within a company. Specifically, annual reports provide an account of the key financial activities that a company has carried out over a year (Meintjes, 2021). Thus, by making annual reports readily available to the target audiences, a company creates an environment of trust and information sharing, therefore, proving its integrity. In addition, the use of annual reports allows key stakeholders to observe trends in financial resources management. Thus, shareholders might suggest improvements in handling key financial transactions. Consequently, better management o financial operations and a more sustainable approach to the use of financial resources will be deployed.
By providing a succinct summary of the major changes observed within an organization, annual reports offer the stakeholders the required transparency and, therefore, facilitate communication between the organizations members and its essential target audiences, including shareholders, customers, retailers, and suppliers. As a result, an organization can follow its values and standards, meeting the key performance criteria. For this reason, annual reports must be seen as a vital part of any companys accountability framework.
Reference
Meintjes, C. (2021). The authentic corporate citizen: The role of relational transparency and stakeholder relationship cultivation strategies. Management Dynamics: Journal of the Southern African Institute for Management Scientists, 30(3), 1-17. Web.
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