Skip to main content

Check company’s financial health before investing

 

   IT is that time of the year when investors start receiving the most critical communication tool from the company, namely the annual report. An annual report provides a summary of how a company has performed in the year that went by, and how it is likely to perform in the forthcoming year. For companies, it is mandatory to send a hard copy of the annual report to each and every shareholder. While a lot of shareholders merely keep annual reports aside or throw them away with old newspapers, there are important cues which savvy investors pick. In fact, for the general public, the annual report is the only financial document that they get to see. Hence, for existing shareholder, it could be the best source of information to determine the financial health of a company and to learn about any problems or opportunities in the business environment. Here are some important things that you could look for in a balance sheet.

Look And Feel Of The Annual Report

Balance sheets can be designed in any shape and size. Also, there is no mandatory rule which specifies the quality of paper to be used in an annual report. Hence, while some companies come up with a plain vanilla annual report with simple fonts, simple colours and pay little attention to page layouts and displays, there are companies which use high quality paper, take special efforts to design it and ensure that the annual report is really presentable to their shareholders. How the annual report looks and feels conveys its image and speaks volumes about the ability of a company to market itself in the corporate world. Quality of paper used in the annual report, many a time, is proportionate or signifies how well the company is doing. Sending the annual report by courier or speed post, as compared to ordinary post, could denote how important an investor is for the company.

Management discussion and analysis

This section is of prime importance for research analysts as well as fund managers. It gives you an overview of the previous year of operations and how the company performed. Besides this, most importantly, the management shares its vision for the coming year, updates on projects which are in the pipeline and thoughts on future projects. However, investors should keep in mind that unlike the numbers, this section is unaudited. Management discussion and analysis is very important to me in case of multinational companies, where there is less communication by way of conference calls or analyst meets during the year. This section gives you important clues as to the direction in which a company is thinking, how they think the year ahead is going to be for the industry and how the company will fare.

Financial statements and strength of balance sheet


Shareholders like to look at the income statement as it denotes how the company is performing in its business, how much profit the company is making and what is it earning from its core operations. Portfolio managers and analysts are concerned about the strength of the balance sheet. Look at things like inter-group loans, investments, cash and debt position in the balance sheet prior to making an investment decision. There are things like auditors qualification, or one-off expenditure which raise a red flag and need to be considered further by analysts. Then, there are things like cash flow statement which is sacrosanct for most analysts.

 


Popular posts from this blog

Mutual Fund Review: Taurus Tax Shield

    Taurus Tax Shield has seen a turnaround in performance since 2007, but still remains a volatile offering… The fund has seen a turnaround in its performance since 2007 and has delivered impressively during market rallies since then. The portfolio is also more diversified. It contained its downfall to an average level in 2008 but is still one of the most volatile offerings in this category. Bold investors can look at this fund.   Strategy The fund manager invests across the market capitalisation and sectors. The selection of stocks is made on the basis of long-term business prospects and value creation. Fund Insight Launched in March 1996, the fund was a laggard with just two annual outperformances. Concentrated stock bets and high exposure to mid and small caps led to it being hit harder during market downturns. The number of stocks in the portfolio never exceeded 20 and it was not rare to see the top 5 holdings account for around 60 per cent of the portfolio. After b...

Use Mutual Fund SWPs for getting fixed payments

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)   Investors time withdrawals optimally to save on tax The systematic withdrawal plan, or SWP, could be called the lesser known cousin of the much talked about and publicised systematic investment plan (SIP). There's yet another cousin — the Systematic Transfer Plan ( STP ). In SIP, you invest a fixed sum of money at regular intervals (monthly/ quarterly) to buy some units of a mutual fund scheme. In SWP, as the name suggests, you do the opposite: You redeem some mutual fund units from your portfolio to get a fixed sum of money at regular intervals (monthly/quarterly/half year/yearly). In SIP, you get a higher numbers of units when the markets are down, and lesser in a buoyant market. In SWP, going by the product logic, you redeem higher number of units when the markets are do...

AXIS Long Term Equity Fund - The Best Tax Saver Fund for 2016

  AXIS Long Term Equity Fund - Invest Online   History:   The open ended mutual fund was launched on December 21 in the year 2009. It is benchmarked against BSE 200 and managed by the fund manager JINESH GOPANI. Initially the scheme was called as Axis tax saver fund but later it was renamed as Axis long term equity fund with effect from September 2, 2011. Nature of investment: As far as asset allocation is concerned, 97.52% of the stocks are equity and 0.02% is debt based. The primary focus of the fund is to invest in diversified equity stocks that have higher growth potential. Total asset size of the fund is in the tune of 4,996 CRORE as of June 30, 2015. Performance: The performance of the fund for one year, 3 years and 5 years are 23.6%, 29.9% and 19.1 respectively which are far greater than 6.4%, 14% and 5.6% benchmark figures. It has also preformed fairly well against SBI magnum Tax Gain (G) and HDFC tax saver (G). The growth comparison is enumerated below;                        ...

IDFC Classic Equity Fund

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)   IDFC Classic Equity Fund IDFC Classic Equity is a large-cap equity fund which currently has assets under management worth Rs. 158.52 crore. It was launched in August 2005. The fund is benchmarked against the BSE-200 Index. Performance YTD 1-Year 3-Year 5-Year Since Inception IDFC Classic Equity 0.93 26.61 6.30 1.01 11.65 BSE 200 1.52 17.31 6.00 1.99 12.98 All figures in % as on January 31, 2013; Returns above one-year in CAGR terms ...

10 year NSC launched, all set to give 8.7 per cent

Invest in Mutual Funds Online Download Mutual Fund Application Forms THE government introduced a 10-year National Savings Certificate ( NSC ), which will earn an interest rate of 8.7 per cent per annum. The notification for the launch of the new savings instrument, 10-year National Savings Certificate (IX-Issue), 2011, has been issued, an official statement said. The scheme will come into effect from December 1, it added. Investments in NSC will earn interest at the rate of 8.7 per cent compounded semi-annually, it said, adding that on an investment of Rs 100, the depositor will get Rs 234.35 on maturity of the NSC. There is no upper limit for investment in the certificate, it added. The new scheme will give better returns along with tax benefit to savers. At present, the maturity period of NSC is six years and it qualifies for tax relief for investment up to Rs 1,00,000 under Section 80C. The decision to raise the maturity period of NSC has been taken on the b...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now