Using annual reports? (Ask B.E.).Q What are the most important parts of an annual report to look at when deciding on buying stock in a company or keeping stock you already own? R. Brown Birmingham, Alabama A The company annual report (also referred to as the 10-K report) can provide any number of clues to help you make the right investment decisions. You must, however, read very carefully and be able to draw conclusions from the information provided. Here are some sections to focus on: * Business profile. This section covers the type of business, the prospects for the industry the firm is in, and its competitors. It's important that you understand how the company makes money. If you don't understand how the company makes money, look elsewhere. * Financial and operating data. This section includes the balance sheet, income statement, and cash flow statistics. Ideally, over several years, revenues should be increasing or losses should be shrinking. * Management's discussion and analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial . This section details the company's performance over the last two years. You must determine if management's interpretation of how its strategies worked is accurate and will lead to future growth. * Pending litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. or contingencies Contingencies (ISSN 1048-9851) is the bimonthly magazine of the American Academy of Actuaries, providing a large and diverse readership with general interest and technical articles on a wide range of issues related to the actuarial profession. . This section details any lawsuits or other circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or that could threaten the assumptions about the financial growth or future prospects for the company. You'll have to determine how seriously these issues place the future of the company at risk. You can get an annual report from the Websites of most companies, or by calling, or going to the Public Register's Annual Report Service at www.prars.com.--Matthew S. Scott Mail your money management questions to Ask B.E., BLACK ENTERPRISE, 130 Fifth Ave., New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , NY 10011, or send an e-mail to scottm@blackenterprise.com. Matthew S Matthew one of the twelve disciples. [N.T.: Matthew] See : Evangelism . Scott |
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