how to read an annual report
DESCRIPTION
A short presentation on how to best go through a big annual report quicklyTRANSCRIPT
let’s make you rich!
HELLO.
let’s make you rich!
HELLO.
In this deck I’m going to discuss the structure of an annual report, the importance of annual reports and how to read one quickly.
an annual report?
WHY SHOULD YOU READ
an annual report?
WHY SHOULD YOU READ
As an investor, an annual report is one of the best sources of information for long term investments. It’s of little use for day-traders, but for other investors this report provides invaluable information about the company, its performance and future prospects.
WHAT YOU WILL LEARN IN
THIS PRESENTATION
How to make sense of big annual reports.
Which parts of annual reports are important.
WHAT YOU WILL
NOT LEARN
How to make sense of financial statements. Anything else I don’t know.
CONTENTS
• Cover • Narrative
• Overview • Year in review • Looking forward • Photos/illustrations
• Financial statements • Income statement • Balance sheet • Cash flow statement • Auditor’s report • Graphs and charts
• Appendices and references
An annual report generally contains the items mentioned on the right. Not all reports will contain all these items, and they will not necessarily be in the same order. Some companies might also add additional sections as per government guidelines.
are more than 100 pages…
BUT MANY ANNUAL REPORTS
an annual report?
HOW SHOULD YOU READ
There’s no right or wrong way to read any annual report. However, the steps outlined in the coming slides provide a quick way for investors to determine whether the company is worth investing in.
1. The Design
consistency with the company’s branding.
Admire the design. You will notice how it aligns well with the colors and/or patterns used in the company’s branding. Airtel’s report uses red heavily throughout the report.
2. The Cover
company name and period of annual report.
Admire the cover for a moment. It’s job is a bit more than just sitting there looking attractive – it tells you the company name and, more importantly, the period of the report.
3. About the Company
know what the company does before you think about investing.
Dive into the report and start by figuring out what exactly the company does. Also see if it has entered any new businesses or markets in the past year or is looking to enter them soon. This information can be gleaned from the corporate message or letters.
4. Auditor’s Report
have the independent auditors given it a clean bill of health?
Nearly all reports contain this. Just glance at this quickly to ensure that the data provided in the report has been validated.
5. Financial Statements
historical and present performance will give you an idea about future prospects.
Find out how the company has been performing over the past few years. Is it making profits? How much liability does it have? Calculate the important ratios.
6. Management Discussion
statements contain only numbers; that’s their biggest weakness.
The management discussion will provide you information about what the company has been up to, and might also provide more information behind some of the numbers in the financial data. Any new partnerships, ventures, impact of regulatory or competitive environment, etc. will be mentioned.
7. Risks
focus on unusual risks so that a big loss doesn’t shock you.
Ignore the general risks like “regulatory changes might impact profitability.” Focus on checking for company-specific risks that might create uncertainty about its future.
8. Clarifications
If you haven’t understood something, there is likely to be a clarification somewhere in the document.
Appendices will generally help you out with technical or financial jargon used in the report. Ensure you have understood everything before you make your decision about the company.
AND THAT’S HOW YOU
FINISH AN ANNUAL REPORT
while noobs are still admiring the cover
