Operating and Financial Review

Dear Vinod

I saw your website and was glad to know about what you are doing in the field of Accounts education. I have a request and I hope you would be able to help. I willing to pay for it as per your terms and condition I am currently enrolled in an MBA course and it requires for me to do an "Operating and Financial Review' of a listed company in stock exchange. I have selected the company and I have the 'Annual Reports' for 3 years to proceed. In general the report should contain an 'Analysis' (in excel spreadsheet) and a report in 1500 words. The report should be discussed in line with Financial ratios (to be calculated based on known data).
I am also from the commerce background but since I have lost touch for many years I would need professional help.Please let me know your terms and conditions. I would then send the data to you over email.

Thanks and regards

 Shaji from India


First of all, I want to tell, still I do not take fees for providing solution. Your background is of commerce. So, you will not face difficulty for writing such report. Yes, I help you, how can make such report.

Meaning of Operating and Financial Review Report 

Operating and financial review report is made for shareholders. Short form of this report is OFR. It is also called director's report. There are lots of shareholders who are not in commerce area. So, just giving them the financial statement in annual report is not sufficient. It is just like, you give a book of rules and regulation to an illiterate labourer who do not know the a,b and c. So, he will see just black words but he could not understand the rules and regulations. So, it is the duty of manager to speak the rules and regulations in simple words. Same will apply on shareholders.

So, operating and financial review report will tell the shareholders

1. Business operations'  Review

2. Business Financial Position's Review

3. Future Business Strategy

Importance of Operating and Financial Review Report 

1. Shareholders can know whether is the opportunities to invest their money or not in the company.

2. This report is helpful for shareholder on any future decision through vote. For example, company wants to buy new land for making plant which is his production increasing plan and it is shown in his future business strategy. But shareholder can caste the vote against this after analyzing the effect on their shares' value or return.

3. This report is the part of social accounting.

Steps to Prepare Operating and Financial Review Report 

1st Step : Review the Business's Operation 

For example, you have three years' annual reports. In these reports, you will see income statements. In income statements, you will see cost, sale and profit.

a) Tell the % trend of cost.
b) Tell the % trend of sale.
c) Tell the % trend of profit.

You can say Profit has increased by 10% this year, compared with last year. If you are multinational company. Shareholder will also interested to know where we sell more. For example, 15% increase in the volume of sales in UK. If there is any increase in any expense, tell in this report. For example, we have increased 10% advertising cost in UK. You can also explain the different profitability ratios for deepness for finding the result of business's operation.

2nd Step : Review the Financial Position

Every shareholder wants to secure his invested money. He can leave his return but he can not tolerate the loss of his investment. So, for gaining his trust. Board of directors should explain the truth of financial position in his review report.

a) Director  should explain the changes in the value of assets and liabilities.

b) Calculate the debt -equity and equity to total asset ratios. Explain what it is showing about the solvency of entity.

c) Make also off-balance sheet.

d) Disclosure of financial position in simple words. Means, The company’s net assets increased by $2,304,365 to $25,623,110. You can also tell the increase of asset in % and tell the reason of increasing in the asset.  The company’s net assets increased by 20%, compared with the previous year, which is consistent with and largely attributable to the current year’s profit after tax.

3rd Step : Review the Business Strategies

Business strategies means the future planning of business. In this, company's directors will explain, how will they grow his business? They can tell in following words.

a)  We will upgrade our xyz product.
b)  We will appoint more sales team in UK.
c)  We will buy new machines for opening new plants. etc.

Sample Operating and Financial Review Report

Following is the Tata Steel's Operating and Financial Review Report







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Accounting Education: Operating and Financial Review
Operating and Financial Review
Accounting Education
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