analysis of corporate annual reports b.v.raghunandan

Investor Awareness Programme of ICWAI

Analysis of Corporate Annual

Reports for Common Investors

-B.V.Raghunandan,SVS College, Bantwal

SDM Law College,

May 28, 2011

Purpose

of

Analysis

• Academic Interest

• Investment

• Disinvestment

• Strength of the Co.

Nature of

Annual

Reports

• Manipulated

• Auditor-Management

• Made Complex

• Too many Details

• Voluminous

• Misleading

• SEBI is a Puppet

Deficiencies of

Accounting

and FM • Never Simplified

• Became Complex

day by day

• Greek Alphabets

• Accounting

Standards

• No Lakshman Rekha

• No guideline for

Healthy Practices

Guidelines for Analysis

• Investment in equity is long-term, but

corporate reports are temporary

• Ignore the opinions of all the experts as

they have a vested interest

• Traders will be active immediately after the

reports

• Do not take too many factors for analysis

• Identify a few factors for evaluating the

performance

Factors to be Considered

• Long-term factors and not short term

profitability

• Consider the Income Statement

• Consider the Balance Sheet

• Look at EPS

• Consider the growth in sales, profits

• Ignore revenue guidance

Sources:Income Statement

(Profit & Loss Account)

• Sources: Dalal Street/Capital Market (July or

August Issue)/Newspapers

• Website of BSE/NSE

• Website of TV channels or Money Control.com

• Websites of concerned companies

• Annual Report received through smail or email

•

Factors in

Income

Statement• Sales

• Profit from Operation

• Extraordinary item

• Surplus profit

• Provision for Dividend

• EPS

Factors in Income Statement

• Sales

• Costs

• EBITDA

• Net Profit

• EPS

• PE Ratio

Factors in Balance Sheet

• Ownership

Funds and Book

Value

• Loan Funds

• Debtors and

• Inventory

• Beta Factor

Limitations of Financial Statements

• Manipulation

• Interpretation

• Not Qualitative

• Future Potential

• AS

• Mix Up

Thank

You