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How do I Read an Investor Report?

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  • Written By: Keith Koons
  • Edited By: Lauren Fritsky
  • Last Modified Date: 13 October 2018
  • Copyright Protected:
    2003-2018
    Conjecture Corporation
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An investor report is prepared by businesses to show data like annual sales figures and other vital statistics. These numbers are often placed on a bar graph to make them easier to understand, but many companies also have a habit of presenting the figures in a way that makes them appear confusing. The most important statistics to read in an investor report are the total revenue, the total expenses, the amount of money in assets, and the total debt of the corporation. By focusing on these four main statistics, the average person can use an investor report to quickly determine how the company did financially.

On average, an investor report has 20 or more categories on it for consumers to evaluate, and the reason for this is often to provide deception on some levels. A company has a legal responsibility to report all of its vital statistics to stockholders to view, but by showing things like spending patterns and asset allocations, it is quite possible to make a bad year appear good. That is why consumers should only focus on the four categories mentioned above.

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Total revenue is normally one of the first things listed on an investor report. It is important for consumers to realize that this statistic has nothing to do with profit, because it is entirely possible for a company to list billions of US Dollars (USD) in revenue while still losing money. This statistic only shows how much the company sold in goods and services; the expenses are factored in later.

The second column to look at is the total expenses. This figure can also be misleading, because some businesses carry very large inventories that on paper would appear as losses. Once those goods are sold the following year, it would appear as pure profit. For this column, the total expenses should be subtracted from the total revenue to determine the true profit of the company.

Assets are another big factor because they tell how comfortable businesses are. In most situations, a larger amount of assets would mean that the company is doing well, especially if it has a large amount of cash on hand. Lower amounts of assets would lead a consumer to believe that the business is struggling and had to use reserves to get through the year. The easiest way to evaluate this category is by comparing it to the previous year's investor report.

Debt is another factor that can easily slip past an investor in a report because companies often list it is a completely separate area from profit and spending. No matter how much money a business made for the year, if it was not enough to cover its debts, then it is not considered positive. Often this section does not itemize actual payment amounts to banks and other entities, so the consumer is left with additional homework to determine an accurate figure.

Investor reports are usually available in two different formats: print and over the Internet. While the same numbers would be available from either source, Internet users have a slight advantage because they can also access statistics from previous years. Every public company is required by law to make each investor report available to consumers, and using multiple years is often the easiest way to measure growth.

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