Operational and Financial Review (OFR)

Posted in Finance, Accounting and Economics Terms, Total Reads: 191

Definition: Operational and Financial Review (OFR)

Operational and financial review (OFR) is the director’s note at the beginning of every annual report. Operational and financial review gives us an idea about the workings of the company in a nutshell. Basically, it contains an overall summary of the performance of the organization by the director. Operational and financial review note contains the financial perspective as well as the operational conduct of the organization.

The OFR note also contains a gist of the plans that the organization has strategized to take forward. The investors and shareholders who judge nooks and hooks of an organization for investment purposes get a better view regarding their investment decision in the organization or company. Whenever we look into an annual report, it starts with a very attractive logo of the company. The annual report then consists of the contents that it contains. The first content is always the director’s note, or we can say it as a note that is directly from the director’s mouth. This operational and financial review note plays a very special role in forming an impression regarding the company.


Importance of Operational and Financial Review (OFR)

Operational and financial review play a major role especially for investors and shareholders. In this world of uncertainties and risks, it is very difficult for an investor to decide where s/he should invest to get better yields. It is always not possible to read, study and analyze the entire annual reports of the company to pick up companies for investment. Annual reports are very vast and a person need ample amount of time to get through it study it and come up with a decision. No doubt every investor has a chartered accountant who takes care of all these, but time saving ideas are never a bad decision. So this director’s OFR note at the very start of the annual report gives an idea about the company in crisp.

The director explains well about the growth of the company in that financial year, how their acquisitions have helped them and also do mention about the threats their company is facing from the market. By reading the director’s operational and financial review note, an investor can get an idea regarding which company would suit to his future plans of investment. This would further help his Chartered accountant to review properly the financial statements in order to come up with a proper decision regarding investment.

Operational and Financial Review (OFR)


Advantages & Disadvantages of Operational and Financial Review (OFR)

Advantages –

1. Company performance in short.

2. Helpful for investors and shareholders.

3. Company analysis becomes easy.

4. Talks a lot about the position of the company in its domain.

Disadvantages –

1. May give a limited view of the company.

2. Sometimes the statements made may be very ambiguous.


Example of Operational and Financial Review

Example of this concept can be, suppose an investor is looking for companies to buy its shares as the person is a voracious player in the share markets. Before handing over the responsibility to a chartered accountant, he himself first tries to analyze the companies. What he does is going through the first few pages of the annual reports of the respective companies. He gets to know about the financial and operational view of the company. Now from the set of companies he likes, he can handover those companies for further analysis to the chartered accountant for getting a better understanding of the financial statements. So in this way the operational and financial review helps.

Hence, this concludes the definition of Operational and Financial Review (OFR) along with its overview.

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