Introduction to Annual Reports for Stock Investors - dummies

Introduction to Annual Reports for Stock Investors

By Paul Mladjenovic

When you’re a regular stockholder, the company sends you its annual report. If you haven’t already invested in a company, contact the company’s shareholder service department for a hard copy or to get a copy e-mailed to you, or look for a link to it on the company’s website.

You can often view a company’s annual report at its website. Any major search engine can help you find it. Downloading or printing the annual report is easy.

The following resources also provide access to annual reports:

  • Check out the Public Register’s Annual Report Service. Go to The Public Register to order a hard copy or to The Public Register Online to view reports online. This organization maintains an extensive collection of annual reports.

  • Use the free annual report service of The Wall Street Journal. If you read this newspaper’s financial pages and see a company with the club symbol (like the one you see on a playing card), then you can order that company’s annual report by calling 800-654-2582 or visiting the website.

You need to carefully analyze an annual report to find out the following:

  • How well the company is doing: Are earnings higher, lower, or the same as the year before? How are sales doing? You can find these numbers clearly presented in the annual report’s financial section.

  • Whether the company is making more money than it’s spending: How does the balance sheet look? Are assets higher or lower than the year before? Is debt growing, shrinking, or about the same as the year before?

  • What management’s strategic plan is for the coming year: How will management build on the company’s success? This plan is usually covered in the beginning of the annual report — frequently in the letter from the chairman of the board.

Your task boils down to figuring out where the company has been, where it is now, and where it’s going. As an investor, you don’t need to read the annual report like a novel — from cover to cover. Instead, approach it like a newspaper and jump around to the relevant sections to get the answers you need to decide whether you should buy or hold on to the stock.