Does a financial report explain the basic profit-making strategy of the business?
Not really. In an ideal world, I would argue, a financial report should not merely report how much profit (net income) was earned by the business and the amounts of revenue and expenses that generated this profit. The financial report should also provide a profit road map, or an earnings blueprint of the business. Financial report readers should be told the basic profit-making strategy of the business, including its most critical profit-making success factors. In their annual financial reports publicly owned corporations are required to disclose their sales revenue and operating expenses by major segments (lines of business); this provides information about which product lines are more profitable than others. However, segments are very large, conglomerate totals that span many different products. Segment disclosure was certainly a step in the right direction. For example, the breakdown between domestic versus international sales revenue and operating profit is very important for many b
