MEPX
Chapter 1 of 10All chapters
  1. 1The set of documents
  2. 2The income statement
  3. 3The balance sheet
  4. 4The cash flow statement
  5. 5Ratios
  6. 6The notes
  7. 7Quality of earnings
  8. 8Valuation basics
  9. 9Limits of accounts
  10. 10A reading routine

Chapter 1 of 10

The set of documents

What arrives in an annual report.

What is in it

Three statements, extensive notes, a management commentary and an auditor's opinion. The statements are short; the notes are where the substance is.

  • The commentary is written to persuade and is still worth reading for what it emphasises.
  • The auditor's opinion states whether the accounts fairly represent the business, not whether it is a good business.

Where to start

Cash flow from operations, then revenue and margin trends, then debt, then the notes. Leave the headline highlights until last, since they were designed to be read first.