*AAKASHAYA
PATRA SEVEN STAR SMART EDUCATION SERIES PART – 41 :* 19.04.2020
Annual Report of a Company
An annual report is a comprehensive report on a company's activities
throughout the preceding year. This report is intended to give shareholders and
other interested people information about the company's activities and financial
performance.As per the Indian company law, each and every listed company has to
prepare its annual report
and distribute to its shareholders within a specific time limit
after the end of that financial year. The annual report of a company is also
available on company's website in the investors section and also available on
websites of the stock exchanges.Annual Reports are normally well presented and
tremendous amount of information is provided
in it so that existing investors, potential investors and other
stakeholders can understands the nature and scope of the business, its recent
developments and future outlook.
Since the annual report is published by the company itself, whatever
is mentioned in it is assumed to be official and true. Hence, any misrepresentation
of facts in the annual report can be held against the company. It contains the
auditor's certificate which certifies the sanctity of the financial data
included in the annual report. But this does not mean that one should blindly
believe in all that the company says in the report. Many companies use
accounting tricks that, while are legal, can mask a company's real financial
performance. One should understand the fact that in addition to providing
financial information, an annual report also serves as a marketing tool for the
company. Hence as an intelligent investor, one should carefully read the annual
report.Most of the investors invest their hard earned money in stocks without
even looking at the annual report of the company.
An average investor looks at the report, glances a few pages and
most of the times gets impressed if the report is well presented, contains
various graphic representation about company's financials and future growth
potentials, pictures of companies plants and machineries, a good profit figure
and a good dividend payout to investors, etc and blindly invests his money
believing that company is fundamentally sound and in good hands. But this in
many cases proves to be a BIG MISTAKE.An intelligent investor reads the annual
report in detail and tries to look beyond the numbers. Benjamin Graham, father
of value investing says - "Stocks are not merely pieces of paper or
electronic quotations on a computer screen, but partial ownership
interests in real businesses. Investors must have an obligation to themselves
to thoroughly analyse the underlying business and its prospects before
purchasing a stock." If you wish to be an intelligent investor and wish to
create massive wealth by long term investing
in stock market, then you must read company's annual report in
depth.
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