If security papers of a corporation are traded on the public stock exchanges, such as the New York Stock Exchange and Nasdaq then this company can be called public. And company can be called private if it is held entirely by its owners and is not traded publicly.
Shareholders of a private business are privileged to assume that the company’s financial statements and footnotes are prepared using GAAP when they receive the periodical financial reports. In case if it is not so the person who represents the directorship of the business must inform the shareholders that GAAP have not been followed in one or more respects. Usually private business’s annual financial report includes minimum of information: the balance sheet, income statement and statement of cash flows. So there is no any letter from the chief executive, no photographs or charts.
On a contrary, the annual report of a publicly traded company has more trappings to it however the requirements are more rigid too. This report must include the management discussion and analysis (MD&A) section that presents the top managers’ interpretation and analysis of the business’s profit performance and other important financial developments over the year. Earnings per share (EPS) are also required for public companies. Only this ratio is required to report a public business, however many public companies report the several others too like a three-year comparative income statement.
Almost all public companies present only concentrated financial information but not comprehensive financial statements so for more specifics they should refer the reader to a more detailed SEC financial report.
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