How to Read Annual Reports of a Company Like a Pro

Often potential investors and stakeholders are interested in doing business with a company. On the other hand, companies are also interested in finding as many stakeholders who are willing to invest in them. For this purpose, to provide all the essential details, the companies prepare and release what we know as the Annual Report (AR).

The annual report also becomes a means of boasting about the company’s achievement in the previous financial year. The annual report is a lengthy document that covers every aspect of the company’s activities. With the increasing inclination towards investing, there has been a huge influx of investors and traders who prefer to do online trading. This form of trading and investing has led to many investors depending on the internet for research.

The annual report is the best source of information about a company. It is easy to find a annual report from the company website, but analyzing and reading it is a whole different ball game. But how to read annual reports, what strategies to be used,

In this article, we will talk about how to read annual reports like a pro?

📃 Be clear on what you are looking for

The report of each company varies. No report is the same. You may also find discrepancies in the reports if you compare between two companies. Before reading a report, you need to be clear on which information is valuable to you. Reading every page is time-consuming and impractical. In the context of investing, the reader should focus more on the aspects of management statements and discussions.

📃 Focus more on company strategies

The annual report also contains valuable information on the different working strategies that the company uses in its business. They also sometimes state strategies that they may test in the forthcoming financial years. The investor needs to analyze such strategies.

📃 Read up on different departments

The annual report mentions information about different departments within the company, such as R&D, human resources, the legal department, etc. These sections provide critical information that will play a role in your decision-making process. As such, it is always better to know about the workings of a department before investing.

📃 Be thorough with financial statements

The financial statement of a company includes 3 important aspects: Balance Sheets, Income Statements, and Cash-flow Statements. This report shows the company’s standing in financial terms. It states what the company owns, the company’s expenditure, profits, and exchange of money with the outside world. It is imperative to be thorough with these aspects.

To Sum Up

These are some key aspects that an investor should cover while reading an annual report because it is the most trusted source for information regarding a company. The company can be held liable for withholding these details. Hence, all the information is expected to be correct. In today’s times, online investing can be done with a click of a mouse, but the homework does not change. Be sure you follow our tips and read the annual report smartly.

You can also read – Top 5 Essential Skills to Become a Successful Trader

Here are some of quarterly reports that you can refer –

Happy Investing 😇

Disclaimer: This blog is not to be construed as investment advice. Trading and investing in the securities market carries risk. Please do your own due diligence or consult a trained financial professional before investing.