Extending Chapter 3: Money Management Strategy

What You'll Do and Learn

• You'll learn how companies organize the financial information they provide in an annual report to shareholders.
• You'll review an annual report and identify where different types of information are presented.

Introduction

In this activity you will learn how corporate financial information is presented to investors and some factors that can affect financial results.

Chapter Notes

In Chapter 3 you learned that creating a budget and monitoring your financial progress are keys to successfully reaching your financial goals. As an individual, your financial statements might include a Personal Balance Sheet, a Cash Flow Statement, and a Budget. Each of these records serves a different purpose. Together, they provide you with the information that you need to help you monitor your financial progress and identify potential problems.

Public companies are required to maintain similar financial records and to provide this information to investors on a regular basis--at least once a year. These financial reports are published in an annual report to shareholders. Many companies view this report as an opportunity to promote their company to current and potential investors. Where 20 pages of financial statements and explanatory notes might do, many companies produce lengthy annual reports that showcase their products and services and highlight prospects for future growth.

Within each annual report you will find a similar organization of key information: a balance sheet; a statement of cash flow, and an income statement. You'll also find three other standard features: a letter to shareholders from the company's president or chairperson, a detailed review of financial results (Management's Discussion and Analysis), and footnotes to the financial statements that explain unusual events or calculations affecting the financial results.

Site Notes

The annual report for the McGraw-Hill Companies, Inc., the parent company of Standard & Poor's, can be found at www.mcgraw-hill.com. From the Investor Relations link on this Web site you'll also find other information for investors, including quarterly earnings statements and presentations to stock analysts. The McGraw-Hill annual report for 2000 is a 60-page document that is viewed with Acrobat Reader software.

Let Me Try

Click here to view the McGraw-Hill 2000 annual report and then print this Worksheet activity.

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