Reading Annual Reports
A company’s financial reports are akin to a medical report of a person, it will display the health status. The financial reports consist a lot information which involved the management team and financial statements. Financial reports help the investor to make the decision whether the company is still worthwhile to invest in or it is time to take flight.
Potential investors of a company can download the annual report from SGX website or company website’s investor relations page. The annual report is released after financial year and there will be quarterly interim reports for investors to monitor the business.
The corporate profile shows the business the company is involved in, it will describe the various business segment and business outlook. The financial highlights will provide a summary of the key financial metrics on revenue, profit and dividend payouts. This will show to investors how well the company has performed over the past few years.
On Chairman’s statement, it will be prudent to read through past years statements to see whether there is a consist message on the business plans. If the company mention that they are doing a turnaround strategy then you can understand the actions taken and whether it is on track or some how it has been derailed. A change of tone will show whether the business has became more optimistic or pessimistic.
We will focus on the financial statements in the next post as this is the crux of the annual report. The three main sections consist of Consolidated Income Statement, Balance Sheets and Consolidated Statement of Cash Flows. It is important to look at the notes below each page of the financial statements. They show detailed explanations on how the figures are derived and assumptions made during the compilations.
In conclusion, when you download the annual reports of interested or invested company in the future, do spend time to decipher the documents. There are a trove of treasures hidden in each annual report.