How to Read a Company Report

If you are looking to invest in a new firm, whether it's in the form of buying shares or becoming an employee, you need to get as much information as possible about the company. Read the company report first. When you examine a company's financial report you discover how a company is faring and whether its outlook is positive or negative. Reading a company report is an involved but ultimately rewarding process.

Instructions

Difficulty: Challenging

1. Familiarize yourself with the types of statements and terminology one finds in a company financial report. The Securities and Exchange Commission (SEC) has a great guide for financial statement novices on its website (see Resources below).
2. Read the letter to shareholders, which is typically at the beginning of a company financial report. This letter, which the CEO usually pens, is a general statement regarding the state of the company and its financial performance in the past quarter or year.
3. Look over the overall business review next. This portion includes the company's objective, recent developments and any trends.
4. Sift through the financial review, which includes vital information such as cash flow, profits, losses and taxes. Items such as the balance sheet, income statement and footnotes are included in the financial review.
5. Compare the company's report with other reports of firms in the same industry. Measuring up items such as debt, depreciation, sales and inventory will give you some insight on where your company stands.
6. Evaluate the information in the company financial report. A prospering company should have plans to build on its current growth, and a company that is not performing well should have concrete, convincing plans to improve in future quarters or years.

Tips & Warnings

• Contact the company's corporate compliance or corporate communications office if you have any questions about the information presented in the company report.