Respond to…
This is the time to share in discussion format your critical learnings and any details from your AOR.
A company’s annual operating review works very similar to the way a company’s quarterly business review operates. Bowen, Davis, and Matsumoto (2005) state, “the quarterly business and annual operating reviews help ensure that your company is growing revenue and that all teams are aligned with your company’s top objectives”(p. 1011). There distinction between the two plays a vital role in the direction of the company. Aristotle said, “the whole is greater than the sum of its parts.” This best describes the differences between the company’s AOR and QBR.
The difference between to two plays a pivotal role. For instance, the QBR focuses on a single quarter while the AOR is for the entire fiscal year. The differential is key when it comes to timing in regards to costs and taxes. This has a lot to do with the accrual accounting process. Stanko and Seller (2003) states, “accrual accounting requires revenues to be recognized when earned and expenses incurred”(p. 55). In Hisco’s case, the accrual accounting can be seen in the company’s R & D projects in each individual fiscal quarter. In the case of Hisco, the AOR illustrates the the elements on the income statement by quarter. Even though sales increased, the company’s net income decreased causing an unfavorable variance attempting to obtain their net income objective.
The attempt to implement a price cut to make the reader competitive with Hisco’s rivals created some adversity regarding budgetary constraints. The approach was to build growth in each quarter which net income grows until i reaches it max capacity in the fourth quarter. The annual report will read as follows: Hisco is on a journey experiencing a construction in Q’3 to make Hisco competitive in Q’4. Bujaki and McConomy (2010) state, “in the case of metaphors, the CEO chocies frequently reveal something about his or her personality and may reveal something about his or her personality and may suggest the future direction of the corporation”(p. 3).
In my personal AOR, the approach in obtaining the company’s long-term goals is by achieving the short-term goals. The plan is a fluid one because each quarter is a goal within a bigger goal where things can be adjusted or tweaked to achieve the ultimate goal. For instance, cuts in funding or investing can take place in a quarter that provides the company the best competitive advantage . For example in the Hisco case, the price for the reader was cut 10% which is a good reasons why sales increased; however, Q’3 experienced a $40,000 cut in Lean Sigma Six. The fiscal cuts of 15% resulted in lower costs; the company experience a fall in quality and perception. The part of the construction process to compete in Q’4.
Bowen, R.M., Davis, A.K., & Matsumoto, D. A. (2005). Emphasis on pro forma versus GAAP earnings in quarterly press releases: Determinants, SEC intervention, and market reactions. The Accounting Review, 80(4),1001-1038. Retrieved from https://search-proquest-com.proxy-library.ashford.edu/docview/218539705?accountid=32521 (Links to an external site.)
Bujaki, M., & McConomy, B. (2010, May). Voluntary disclosures in corporate annual reports — More than meets the eye. CMA Management, 84(3), 14-16.
Stanko, B., & Zeller, T. L (2003). Understanding corporate annual reports: A user’s guide. Hoboken, N.J.: John Wiley & Sons, Inc. eBook., Database: eBook Collection (EBSCOhost).
Respond to…
An annual review is an operational review of an organization, in this case Hisco and how it has performed throughout the year. The keys to an Annual Operating Report are first the CEO’s letter to the shareholders. It is important as it sets the tone and essentially summarizes what the report states. It will generally focus on accomplishments and areas of opportunity as well as any failures that may have encountered throughout the year. The CEO’s letter is also generally followed by business analysis of the market, risk, and management’s operations. Then the financials are reviewed such as the Income Statement, Balance Sheet, Cash Flows, and Credit Line. In a study conducted in China, it was found that the readability of annual reports had a significant impact in the decisions of investors. “The annual report is one of the carriers of information propagation. Listed companies can decrease barriers of debt financing and relieve information asymmetry by increasing the readability of annual reports, thus decreasing the possibility of inefficient investment.” (Yuliang, Liu, F., Liu, C., Usman & Dutta, 2020) Although this was conducted in China, this resonates to any company and any annual report. In my opinions a lot of the problems that we encounter throughout life, business and project management often go back to a lack of communication. The study just further proves how important communication is to the shareholders and potential investors.
When it comes to my AOR, there were many lessons learned. Quarter over Quarter we conducted our Quarterly Business Review which initially I felt that the company was doing well, Q3 hurt the most though unfortunately due to Redex launching Project 3 before Hisco was able to and had a negative impact to Hisco’s market share. I also feel that my pricing strategy may have hurt more than helped Hisco’s financials. I did cut the price in the last quarter, but even then, it was higher than competitors. Ironically, I went over the credit line four times, even though we had the most sales. Hisco was able to bounce back from its original loss in market share during Q3. Overall, the perceived quality vs technical quality went down. Although, there were ups and downs, I was ultimately able to meet Stan Sloane’s expectations of net income between $300k to $400k
Reference:
Bujaki, M., & McConomy, B. (2010, May). Voluntary disclosures in corporate annual reports — More than meets the eye. CMA Management, 84(3), 14-16
Medtronic. (2016). Integrated performance report (Links to an external site.) (Links to an external site.). Retrieved from http://www.medtronic.com/content/dam/medtronic-com/us-en/corporate/documents/17267.MED.Sustainability.Report_4_FINAL%20NOV%208.pdf
Stanko, B., & Zeller, T. L (2003). Understanding corporate annual reports: A user’s guide. Hoboken, N.J.: John Wiley & Sons, Inc. eBook., Database: eBook Collection (EBSCOhost).
Yuliang Zhao, Fengyu Liu, Changyue Liu, Usman, M., & Dutta, K. D. (2020). Readability of Annual Report and Inefficient Investment: Evidence from Debt Financing. 19(1), 166–190
Please use peer review journal articles to validate the responses
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