Understanding Business Accounting For Dummies, 2nd Edition (60 page)
Read Understanding Business Accounting For Dummies, 2nd Edition Online
Authors: Colin Barrow,John A. Tracy
Tags: #Finance, #Business
Warren Buffett's annual letter to shareholders
We have to call your attention to one notable exception to the generally self-serving and slanted writing found in the letter to shareholders by the chief executive officer of the business in annual financial reports. The annual letter to stockholders of Berkshire Hathaway, Inc. is written by Warren Buffett, the Chairman and CEO. Mr Buffett has become very well known - he's called the ‘Oracle of Omaha'. In the annual ranking of the world's richest people by
Forbes
magazine he is near the top of the list - right behind people like Bill Gates, the co-founder of Microsoft. If you had invested £1,000 with him in 1960, your investment would be worth well over £1,000,000 today. Mr Buffett's letters are the epitome of telling it like it is; they are very frank and quite humorous.You can go to the Web site of the company (
www.berkshirehathaway.com
) and download his most recent letter. You'll learn a lot about his investing philosophy and the letters are a delight to read.
Public corporations typically include most of the following disclosures in their annual financial reports to their shareholders:
Cover (or transmittal) letter):
A letter from the chief executive of the business to the shareholders.
A short table that presents the shareholder with a financial thumbnail sketch of the business.
Deals with the major developments and changes during the year that affected the financial performance and situation of the business.
The sales revenue and operating profits are reported for the major divisions of the organisation or for its different markets (international versus domestic, for example).
Financial history that extends back beyond the years (usually three but can be up to five or six) included in the primary financial statements.
Bar charts, trend charts, and pie charts representing financial conditions; photos of key people and products.
information about the company, its products, its employees, and its managers, often stressing an over-arching theme for the year.
Information about members of top management and the board of directors.
Shows financial performance for all four quarters in the year and share price ranges for each quarter.
