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An annual report carries a lot of important information that requires detailed analysis to make proper financial decisions as an investor. What are the important areas on which attention should be given? How to analyze the figures in the Financial Statement?
{{17/08/2021}}
Annual Report is the yearly report given by a company stating its vision, plans, financial results, board report, and other important information. It is generally dated to 31st March. The AR is published on the company’s official website and is provided as a PDF document and the shareholders are provided with the hard copy of the same.
The AR is a public document that contains an auditor’s certification that certifies the sanctity of the report. While there are other media sites that claim to provide true data about the company, but investors should avoid using these sources. The AR downloaded from the company’s own website is of utmost sanctity and maximum reliance should be placed on it for authentic data.
For every investor, it is a very tough decision as to in which company investment is to be made. He has to look into the working of the company and the people at the helm if the affairs to take a rational decision about the future prospects. The length of the AR sometimes demotivates a person from going through the whole of it. However, the importance of AR cannot be diminished, hence, the focus should be given to focus on the most important aspects and take a wise decision about the future of the company.
Problems with AR:
Considering the length of the AR, it is not possible to go through the whole report. Also, 80% of the information is not important for us and does not affect our decision-making process. Therefore, it is very important to identify the remaining 20% and spend time analyzing this information. The most important aspects of AR are:
Let us start understanding step by step where should we focus our attention
As an investor AR are very important and proper time should be given to read it. While you can read the first few points like the initial page, Chairman’s letter, and report on Corporate governance in 5-10mins each topic, the Management discussion, and Consolidated Financial statement should be given around half an hour each to analyze. Thus, around 1.5hours should be allocated to read it carefully and decide accordingly.
{{CA Monk}}