Profitability and Ratio Analysis



Profitability and Ratio Analysis

1- Identify and explain the main section of annual report

There are main four sections of company's annual report

I - Auditor's report

II - Financial statements

III - Notes to the financial statements

IV - Management's discussion and analysis

I. Auditor's report: This report tells the accuracy about financial statements after comprehensive examination of organizations accounts. This report assesses the strength and consistency of financial statements of an organization.

II- Financial statements: It is proper record of financial behavior of an organization. The financial data is shown in a proper manner so it can be easily understood. The main organs of financial statements are balance sheet, the income and loss statement, and the statement of cash out and in flows. Theses statements show authentic and concrete position of all financial accounts of an organization. This is the attractive part of the company through which investors decide to invest their capital in an organization.

III- Notes to the financial statements: This statement is an additional and supportive tool to understand the financial statements. Usually information is not required to mention in financial statements but it should be published in organizational annual reports under the head of Notes to the financial statements. It will illustrate true picture of monetary statements because these notes can be lengthy.

IV- Management's discussion and analysis: It presents descriptive details from the part of management, of how unit has performed in the past, its monetary condition, and its future outlook. This will provide complete, composite and impartial data to assist them whether to invest or not.

2- Financial Performance: Key factors

Basically, revenue and expenditure are two main heads of financial performance. Income and expense are the main part of income statement. This will measure the outcome of organization's policies and operation in financial terms like investment returns, ...