How to read an annual report


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A short presentation on how to best go through a big annual report quickly

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How to read an annual report

  1. 1. HELLO. let’s make you rich!
  2. 2. HELLO. let’s make you rich! In this deck I’m going to discuss the structure of an annual report, the importance of annual reports and how to read one quickly.
  3. 3. WHY SHOULD YOU READ an annual report?
  4. 4. WHY SHOULD YOU READ an annual report? As an investor, an annual report is one of the best sources of information for long term investments. It’s of little use for day-traders, but for other investors this report provides invaluable information about the company, its performance and future prospects.
  5. 5. WHAT YOU WILL LEARN IN THIS PRESENTATION WHAT YOU WILL NOT LEARN How to make sense of big annual reports. Which parts of annual reports are important. How to make sense of financial statements. Anything else I don’t know.
  6. 6. • Cover • Narrative CONTENTS • • • • Overview Year in review Looking forward Photos/illustrations • Financial statements An annual report generally contains the items mentioned on the right. Not all reports will contain all these items, and they will not necessarily be in the same order. Some companies might also add additional sections as per government guidelines. • • • • • Income statement Balance sheet Cash flow statement Auditor’s report Graphs and charts • Appendices and references
  7. 7. BUT MANY ANNUAL REPORTS are more than 100 pages…
  8. 8. HOW SHOULD YOU READ an annual report? There’s no right or wrong way to read any annual report. However, the steps outlined in the coming slides provide a quick way for investors to determine whether the company is worth investing in.
  9. 9. 1. The Design consistency with the company’s branding. Admire the design. You will notice how it aligns well with the colors and/or patterns used in the company’s branding. Airtel’s report uses red heavily throughout the report.
  10. 10. 2. The Cover company name and period of annual report. Admire the cover for a moment. It’s job is a bit more than just sitting there looking attractive – it tells you the company name and, more importantly, the period of the report.
  11. 11. 3. About the Company know what the company does before you think about investing. Dive into the report and start by figuring out what exactly the company does. Also see if it has entered any new businesses or markets in the past year or is looking to enter them soon. This information can be gleaned from the corporate message or letters.
  12. 12. 4. Auditor’s Report have the independent auditors given it a clean bill of health? Nearly all reports contain this. Just glance at this quickly to ensure that the data provided in the report has been validated.
  13. 13. 5. Financial Statements historical and present performance will give you an idea about future prospects. Find out how the company has been performing over the past few years. Is it making profits? How much liability does it have? Calculate the important ratios.
  14. 14. 6. Management Discussion statements contain only numbers; that’s their biggest weakness. The management discussion will provide you information about what the company has been up to, and might also provide more information behind some of the numbers in the financial data. Any new partnerships, ventures, impact of regulatory or competitive environment, etc. will be mentioned.
  15. 15. 7. Risks focus on unusual risks so that a big loss doesn’t shock you. Ignore the general risks like “regulatory changes might impact profitability.” Focus on checking for company-specific risks that might create uncertainty about its future.
  16. 16. 8. Clarifications If you haven’t understood something, there is likely to be a clarification somewhere in the document. Appendices will generally help you out with technical or financial jargon used in the report. Ensure you have understood everything before you make your decision about the company.
  17. 17. AND THAT’S HOW YOU FINISH AN ANNUAL REPORT while noobs are still admiring the cover
  18. 18. GET IN TOUCH Sanket Baxi E: M: (+91) 9004 253 351 T: @vezance