Reading annual reports: From glancing to dissecting (part 2)
Annual reports are the only published documents that contain abundant information about a company’s performance. Reviewing the financial statements help to assess various aspects of the business performance and risk from a quantitative perspective. Financial analysts normally look at certain financial statement ratios for guidance to justify their concerns about:
- Did the net profit rise or fall?
- Is cash cycle rising or falling?
- Is operating cash flow healthy?
- Is gearing too high?
- Is ROE improving or declining?
- Is shareholders’ equity rising or falling?
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