Reading the Annual Report
When it comes to reading financial documents, most people would rather walk over hot coals then peruse endless rows of numbers. Corporations count on that and fill their annual reports with glossy color photos and colorful commentary; a lot of people assume that a heavy, glossy report means a successful year. The numbers inside, though, may tell a completely different story. It's up to you to get comfortable with the numbers; when you do, you'll find a wealth of information about the company's current success.
If you're already a shareholder, you'll automatically get a copy of the annual report every year; if you're not yet invested in the company, you can simply call and ask for one or look at it online. Every company's report looks different, and they may be assembled in different orders. However, every publicly traded company's annual report contains the same basic items:
Letter from the chairman of the board (expect a big pile of spin here)
A description of the company's products and services (more spin)
Financial statements (read the footnotes carefully; they contain some of the meat)
Management discussion (sort of a big picture look at the company, with a little spin)
CPA opinion letter (read this to make sure the company's financial position is accurately represented)
Company information (locations, officer names, and contact information)
Historical stock data (including dividend history and dividend reinvestment plan program information)
