What to read in Annual reports of the company? - Answered

Forums > raja on 9/22/2020 | VIews: 310

Annual reports contains hundreads of pages, going through each pages is a tedious tasks and in most cases its not possible and not feasible also. Most of the pages contains generic information to meet the guidelines set by government bodies.

To better utilize the time and get gist of the company, focus on following points

  1. Chairman's/Managing Director's message to Shareholders

  2. Financial Highlights 

  3. Management Discussions and Analysis report

  4. Consolidated Balance Sheet (standalone balance sheet gives half information)

  5. Cash flow statement (most important)

    1. Do not trust on what is written as profit in Profit & Loss statement, if the profit is not converting into cash and displayed into Cash flow statement.

    2. Ideally, CFO (Cash from Operative activities) should be greater than CFI (Cash from Investing) + CFF (Cash from Financing) ie CFO > CFI+CCF

    3. Read more about Cash flow and other related topics here (Cash flow topic of this article).

Hope this helps.

Disclaimer: This post is for educational purpose.

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