The primary reason the annual report is important in finance is that it is used by investors when they form expectations about the firm's future earnings and dividends, and the riskiness of those cash flows.

Question

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The annual report provides information about the financial situation and performance of the company, which is important for investors when they make decisions about buying or selling its shares. By analyzing the financial statements, notes, and other sections of the annual report, investors can assess the firm's profitability, liquidity, solvency, and other key metrics that affect its valuation and risk. Additionally, the annual report may disclose important information about the company's strategy, operations, management, and governance, which can also impact investors' perceptions and expectations of the firm's future prospects.

The Primary Reason the Annual Report Is Important in Finance