COMPANY’S ANNUAL REPORT- AN INVESTOR’S GUIDE4 min read
There are many aspects that should be clear prior to making an investment. Experienced investors always suggest to perform research and analysis of the sector and the company one’s investing into. One of these major essential tools is a company’s annual report.
A company’s annual report is a documentational report that the company prepares for its shareholders. This report provides the details of the financial performance of the company over the year. It also includes a summary of all the important activities the business has carried out in that particular year.
Annual reports are very essential for the investors, employees, customers, suppliers and all the individuals associated with or linked to that specific company.
Walking through the elements of a company’s annual report
An organisation’s annual report can be classified into two broad categories- Financial and Non-Financial.
The non-financial section of the report lists the following components:
- Communications from Promoters and Senior Management
- Director’s Report
- Management Discussion & Analysis (MDA)
- Details of Personnel in charge of running the Company
- Report on Corporate Governance
- Notice of Annual General Meeting
On the other hand, the financial section incorporates the following subparts:
- The Independent Auditor’s Report
- Financial Statements like Balance Sheet, Profit & Loss (P/L) Statement and Cash-Flow Statement
- Schedules/Notes to Financial Statements
- Related Party Disclosures
Something Interesting Here!
Emami is one of the renowned consumer goods companies in India. It interposed a famous line from a Bollywood song from the movie Dabangg- “Main Zandu Balm hui, darling tere liye”, in its report of 2010-11. Zandu Balm is one of the products of Emami which is well used in India. This really helped them to connect to their customers. But it was not their first time. Emami has effectively utilised Bollywood references multiple times to keep a link with the young consumers.
Interpreting the Balance Sheet
We saw that there are multiple elements in the company’s annual report. But, do we need a thorough understanding of each of them? Well! Although we don’t actually require all, it would be great if we go through the whole lot, but one of the most important documents among them that we cannot avoid is the company’s ‘balance sheet’. A balance sheet is technically a financial statement that displays the assets (what the company owns), liabilities (what all the company owes) and equity (amount invested by the shareholders) of the company. It is a very crucial document for the business’s investors.
Whenever an individual is going through the balance sheet of a company, they can spot these components and can, to a great extent, analyse the current financial status of the organisation.
Apart from the balance sheet, the Income statement and Cash Flow statement are the important lookouts in the yearly report of a company. The Income statement of a company reveals the profit and loss in addition to the revenue gained by the business every quarter of the year. The Cash Flow statement, on the other hand, throws light on the amount of cash and cash equivalents entering and exiting the company.
These two documents can also prove to be quite valuable to us as investors as they shed light on the financial standing of the organisation.
Investors looking out for a company’s annual report have a close resemblance to kids waiting for their report cards every year. In both cases, the parties rely on these reports for their future growth. The road to be a successful investor is a bit complicated. And there are numerous integrals that we have to look for or have proficiency in. As we mentioned earlier, it is important to know an organisation’s in and outs before making an investment, the annual report of a company provides us with tonnes of information that can prove to be very beneficial in our investment passage.
We can get access to annual reports and other essential documents of companies on NSE’s website.
Things do not end here! To have an in-depth understanding of the complete topic, you should jump on to Paytm Wealth Academy where you get relevant courses and webinars to guide and infuse you with knowledge in your investment journey. Happy Learning!!