Presenting to Stakeholders

Problem 6 .9

The shareholders of an organization are basically interested in two factors , being two different returns . One encompasses the return attained in the form of dividends at the end of each year . The other comprises the capital gain arising once the common stock is sold in the stock market . Such return is commonly known as capital appreciation The annual report is a financial document that specifically triggers the aforementioned information needs via certain important statements . For instance , the income statement and the balance sheet serve such purpose The income

statement portrays the profit generated during a particular time frame . Dividends are paid to common stockholders from such profit and accumulated profit in past periods . Therefore , this statement will immediately give a clear idea of the dividend potential of the organization . In Finance , it is commonly believed that the information portrayed in the Income Statement reveals asymmetric information about the potential of the organization to pay out dividends . Scholars contend that this is a key variable that influences the price of shares in the stock market

The other type of return , being the capital appreciation of the firm is more revealed under the balance sheet . This statement shows the assets liabilities and equity capital of the organization . Therefore , one can examine the growth or decline in the resources (assets ) of the company as well as the movement in reserves . Reserves encompass profits set aside either according to the director 's discretion or in line with applicable standards and regulations...