If you possess a company’s share you must receive quarterly and annual financial reports of this company.
The broker at which you’ve got an account usually sends them to you. If you keep the stock certificate by yourself these reports should be sent to you directly by mail. If the company doesn’t do it due to the known reasons you may find these reports over the Internet.
You should look through the annual reports only on the goals you follow. As far as you are a depositor you should concern about the company’s income, survival, growth, stability, dividends, potential problems, risks and other factors, that may help to affect your depositions in this company.
Annual Reports are pieces of art for those who work over them, and that’s why you shouldn’t read them as books. The first pages are usually filled with bright pictures and tell you about company’s goals and how great it follows them. You may skip it for sure as this information has only commercial feature.
The real Depositor is interested in the information about the company in numbers that can be compared with the values of the past years. Reading and comparing Annual Reports of a company from year to year you can easily trace the evolution scheme of it. You can learn a lot watching how a company changes its business model from year to year or implements its plans.
Every Annual Report consists of different units. Now we will talk about them and see the questions you should ask yourself when reading these units:
- Chairman of the Board letter should cover the questions concerning the completion or incompletion the pointed tasks and the explanations, what should or should not be done about it. Is this letter written well? Read between the lines, what he or she apologies for.
- Sales and Marketing. This unit should tell us about company’s sales: how, when and where. Is it clear where the company gets its main income? Is it easy to understand the information about every course?
- Financial performance over the past 10 years. Is this information present in the report? Do the profits and earnings grow every year?
- Management Analysis. This is the discussion of even growth for the past years. How clearly is the information presented? Do they use hard-for-understanding words?
- Independent Auditor letter is the report of an independent auditing firm about the financial state of the company. Is the company respectable? What do they say about the company’s numbers?
- Financial Statement. Pay attention to the sales level, profit, loss and company’s debts. Compare these numbers to the previous year ones. Read the notes.
- Addresses and trademarks of the company. Where is the main office? Is it clear what trademarks the company possesses and how widespread the goods are abroad?
- The list of directors and employees. How many directors are there? Are they known and respected in business circles?
- Stock price history. What is the price trend: upward or downward? What stock markets trade them? Does the company have the dividends payout history?
