In the following tutorial, we will look at the information available in corporate reports. We will cover the following topics:
WHAT IS AN ANNUAL REPORT AND WHY IS IT USEFUL TO INVESTORS?
A Company is required by law to provide its shareholders with information about its operations. An annual report satisfies this obligation.
The information in an annual report shows the company finances. It is extremely useful to investors because it allows them to use their own judgment on how well the company is doing and forecast its future earnings and dividends. For an investor, this information is critical for making investment decisions.
You can also read the Chairman's letter about the company's future goals. Use caution with these letters since the author is company representative. You may want to look at how accurate this letter has been in the past to give you an idea how much you can trust it.
Read below here to find out what is included in an annual report.
REQUIRED
INFORMATION
An annual report is a brief profile on the health of a company.
Here is what comprises an annual report:
- A letter from the chairman on the high points of business in
the past year with predictions for the next year.
- Its philosophy: a section that describes how the company does
business.
- An extensive report on each section of operations in the company.
This portion of the report may describe the services or the products
that the business offers.
- Financial information that includes the profit and loss (P&L)
statements and a balance sheet. The
P&L statement describes income and expenses and gives the net
profit for the year. The balance sheet describes assets and liabilities
and compares them to the previous year. In this section, important
information may be revealed in the footnotes. They may discuss
current or pending lawsuits or government regulations that have
an impact on company operations.
- An auditor's letter confirming that all of the information provided
in the report is accurate and has been certified by independent
accountants.
Keep in mind that the public relations department of the company
produces the annual report. The report should be very accurate with
all the information described in the best possible manner.
HOW
TO OBTAIN ANNUAL REPORTS
Annual reports are mailed automatically to all shareholders of
record. To obtain the annual report for a company in which you do
not own shares, call the public relations (or shareholder relations)
department of the company. You may also look on the company web
site, or search the Internet. There are several sources on the Internet
providing information on public companies. You can search the EDGAR
database at http://www.sec.gov/edgarhp.htm, The Microsoft Investor
Web site at http://www.investor.msn.com, The American Association
of Individual Investors at http://www.aaii.org, or Yahoo Financial
Web site at http://biz.yahoo.com/p/u/utx.html, to name a few. Simply
keying in the stock's symbol will provide you with the needed information.
QUARTERLY AND OTHER
FINANCIAL REPORTS
Besides the annual report, companies provide several other financial
reports such as a quarterly report, 10-K reports and statistical
supplements.
Quarterly reports are very similar to the annual reports
except they are issued every three months and are less comprehensive.
They may be obtained in the same way as an annual report.
Larger firms issue 10-K reports that are more detailed than annual
reports. A 10-K report provides detailed information about divisions
and subdivision of the company. These reports are sent to stockholders
only by request. One should contact the company's corporate secretary
to receive a 10-K. All 10-K filings are available on the EDGAR database
at http://www.sec.gov/edgarhp.htm.
Statistical Supplements are reports of larger corporations
as well. They provide financial information, such as statement data
and key ratios, which can be dated back ten to twenty years. These
reports are also posted on the EDGAR database (http://www.sec.gov/edgarhp.htm).
This concludes our tutorial on corporate financial reports.
|
