HOWTOREADAFINANCIALREPORT.ppt

HOW TO READ A FINANCIAL REPORT The Purpose of this presentation is to help you better understand the data included in financial reports and how to analyze it. Learn more about companies that offer employment or provided investment opportunities. COMPONENTS OF AN ANNUAL REPORT The Letter to Shareholders: This gives a broad overview of the company’s business and financial performance. The Business Review: This summarizes a company’s recent developments, trends and objectives. The Financial Review: This presents a company’s business performance in $. COMPONENTS OF AN ANNUAL REPORT The Financial Review Management’s Discussion and Analysis: This section explains all significant changes from year to year in the financial statements. It also includes charts and graphs highlighting the year to year changes. Audited Financial Statements: Consists of the balance sheet, income statement, statement of changes equity, and cash flow. THE BALANCE SHEET The balance sheet portrays the financial position of the company by showing what the company owns and what it owes at the report date. It is a snapshot, since it reports the company’s financial position at a specific point in time. The Income Statement The Income Statement can be thought of more like a motion picture, since it reports on how a company performed during the period(s) presented and shows whether that company’s operations have resulted in a profit or loss. The Statement of Changes in Shareholders’ Equity The statement of changes in shareholders’ equity reconciles the activity in the equity section of the balance sheet from period to period. Changes in shareholders’ equity result for company profits or losses, dividends and/or stock issuances. Statement of Cash Flows The statement of cash flows reports on the company’s cash movements during the period(s) separating them by operating, investing and financing activities. The Footnotes The footnotes provide more detailed information about the financial statements. A