- Financial Statement, including standalone and consolidated
- Auditors report
- Chairpersons statement
- Corporate Governance information
- Directors Report
- Market price of the company’s stock and dividends that are paid out
- A brief description of the company’s business In recent years
- Management discussion and analysis (MDA) of the business’s financial condition and the results that the company has posted in the previous year.
- Operating and financial review
- General description of the industry or industries in which the company is involved
- Balance Sheet
- Profit and Loss statement
- Cash flow statement
- Statement of changes in equity
- Notes to the financial statements
- Accounting policy
- Other features.
- Auditor Qualifications on the reporting of numbers
- In case the auditors of the company have any observations w.r.t. to the reporting practices of the company, the same shall be included in the Audit Report section of the Annual report. Any alarming qualification can act as a red flag for investors
- Management Discussion & Analysis - Risk Factors and Growth Guidances
- Managements usually highlight the risks and growth guidances to the business in the MD&A section of the Annual Report. Investors must keep a close eye on what the managements have to say about the operating risk environment and accordingly account for them in the fundamental analysis process.
- Related Party Transactions
- Since the Annual report is most comprehensive document that is published by a company in the year, it also summarises all related party transactions with the directors, promoters, etc. A review of the related party transactions can help investors understand the integrity of the managements and promoters and assess if any money is being siphoned off from the business
- Financial Statements specifically Cash Flow Statements
- Businesses survive to generate profits and the quality of profits of a business is best judged by the Cash generated by the business. Annual reports disclose cash flow statements in detail at a consolidated and standalone level beside the P&L and Balance Sheet. Investors should look out for a red flag or ask questions if a company despite constant profitability is unable to generate free cash flow and more importantly operating free cash flow. A high profit number but negative operating cash flow number implies constant investment in working capital which requires further detailed investigation.
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