Listen to a Business English Dialogue about Annual basis
Bobby: Hi Lily, have you heard about the term “annual basis” in finance?
Lily: Yes, Bobby. “Annual basis” refers to something that is calculated or measured on a yearly basis, providing an annual perspective on financial performance or metrics.
Bobby: That’s right. For example, annual basis can be used to report annual income, expenses, profits, or growth rates of investments over a one-year period.
Lily: How does using an annual basis help in financial analysis?
Bobby: Using an annual basis allows for easier comparison of financial data over time, helping investors and analysts assess trends, evaluate performance, and make informed decisions.
Lily: Can you provide an example of how annual basis is used in practice?
Bobby: Sure. Companies often report their financial statements, such as income statements and balance sheets, on an annual basis to provide stakeholders with a comprehensive view of their financial health.
Lily: Are there any drawbacks to relying solely on annual basis for financial analysis?
Bobby: One drawback is that using an annual basis may not capture short-term fluctuations or trends that occur within the year, leading to potentially incomplete or skewed assessments of financial performance.
Lily: How can investors and analysts adjust for the limitations of using an annual basis?
Bobby: Investors and analysts can supplement annual data with more frequent or periodic updates, such as quarterly reports or monthly statements, to gain a more nuanced understanding of a company’s financial performance.
Lily: Are there any regulatory requirements or standards related to reporting on an annual basis?
Bobby: Yes, many regulatory bodies and accounting standards, such as the Generally Accepted Accounting Principles (GAAP) in the United States, require companies to prepare and disclose annual financial statements for transparency and accountability.
Lily: It seems like using an annual basis provides a valuable framework for evaluating financial performance and making informed decisions.
Bobby: Absolutely, Lily. Annual basis helps stakeholders gain insights into the long-term trends and sustainability of businesses, contributing to better decision-making and risk management.