How do I read the message for shareholders?
The report for shareholders is a summary of its performance in the past year presented by the management. This message contains many pages of numbers and details of the company's operations and can be staggering in full. The average reader, who is not a financial expert, can most receive from reading a report for shareholders by focusing on several key parts. The sections that need to be carefully read are a letter to shareholders, auditor's opinion, profit and loss statement and balance, footnotes and discussion and analysis of management. The reader can get a good overall picture of the company with this information.
The letter of shareholders is designed to summarize the results of the previous year for business and is generally written in a less technical way for a wide audience. Sometimes it is written as a group as a group and sometimes there will be individual letters from the manager. Whatever the results are prepared in the most positive language. Among the things you need to be careful is an explanation of poor performance as a resultFactors outside the control of society and optimistic outlooks for the future despite the unpleasant current results.
For public companies, the required part of the annual report of the shareholder is a written opinion of an independent auditor on whether the report represents a fair and accurate representation of the company, ie an "unqualified" opinion. The auditor, whose opinion is "qualified", found something in corporate records that does not coincide with the accepted accounting procedures or probably represents the inaccuracy of the results. Anything other than a "unskilled" opinion is a warning signal.
The profit and loss statement and the balance sheets are two basic financial statements that will outline the company of the PNNA at the end of the period and loss for the period and financial situation of the company. The basic numbers that need to be found in the profit and loss statement are the amounts of sales growth and earnings from one year to the next. A potential problem is to grow inÉda without the appropriate increase in sales. Take a look at any unusual large amounts in "other income and expenditure" that can disrupt the results in a year. This category describes items that are outside the range of routine operations and can be one -time events.
In the balance sheet, compare the current assets with current obligations to see the current ratio, one assessment of the company's liquidity. If the ratio is less than one, ie current obligations are higher than current assets, the company may have difficulty with their duties. Another key ratio is the debt to its own capital, ie the comparison of all debts of the company, short -term and long -term, its total capital. If the mooding result is highly used or indebted. If the current ratio is low and the debt ratio to its own capital is high, the combination of these two indicators can indicate serious problems for the company.
Read the footnote notes on the financial statements. These detailed explanationsIt will withstand any unusual items in the financial part of the report for shareholders and cover the accounting principles used to estimate numbers. Footnotes also publish how income taxes are calculated. Readers will learn about pension plans and shares who benefit from these programs and how they influence the performance of the company.
Discussion and management analysis is an evaluation of the position of the company's position and the future for the future. It includes information on items that are not included in the financial statements such as contracts, waiting for litigation, derivative arrangements and accreditation. The intention of this part of the report for shareholders is to reveal an item that can be important for business, even if they are not part of a specific financial statements.