Learn how to read a report and accounts of a company

The time of presentation of results has begun. For an investor is essential to identify the key indicators of a company's accounts.
Attest to the quality of business results is essential to choose the destination of their investments. So there is to know how to "work from home".
Sometimes appearances are deceptive. The number highlighting in million, net income for the first half. The number is not worth, needs context, comparison.


First conclusion: the net, alone, is not a good indicator, since it includes gains and / or extraordinary losses that have nothing to do with the company's operating performance, as well as changes in taxation or impairments, among others.

Second conclusion: the time to review a company's accounts, whatever the indicator used, you should always try to look for items that did not include non-recurrent results, extraordinary results. Thus, the analysis will be closer to the real operating company.

Third conclusion: "In fact, there is a strange company releases results that at first sight, seem positive but that a more detailed level show the fragility of numbers," said the That is, if private investors do not neglect your homework and make your analysis reports and company accounts.

Objective: to know where to look, and what to look for a report and accounts in order to certify the quality of results.

 
So rather, than start by looking at the profit should first focus on revenue. A good indicator, and one of the most famous investor, is the EBITDA (earnings before interest, taxes, depreciation and provisions).

This is the company's operating income, or revenue minus costs. It is important to realize that this result has increased (or decreased) due to higher sales or lower costs, currently much in vogue. "Indeed, a positive result generated mainly by cost reduction rather than the revenue increase may reflect the difficulty of the undertaking carries on business' core ', where the long-term will be generated cash-flows.

Note that "sales growth is the purest measure to gauge what effect the crisis on the company's revenue.
Also draws attention to the fact that EBITDA may include "extraordinary effects. That is, EBITDA does not exclude gains or losses resulting from non-recurring, for example, the purchase or sale of assets.
Now with regard to banks, given their specific nature, when considering a report of this sector should take into account two main indicators: net interest income, which reflects the difference between the amount paid on deposits and the amount charged to credit, thereby measuring the bank's ability to increase profits. Also the gross income, the income resulting from interest income, commissions paid and the results of operations of 'trading'.

Key indicators to take into account
• Development of sales is essential for analyzing the impact of the crisis.

 
The "sales is the purest measure to gauge what effect the crisis on the revenue of the company. Continued growth in sales is a strong indicator of the resilience of the company weather the current crisis. When possible you should also meet sales 'like-for-like' (LFL), as are based on the assets of the same period last year.

• EBITDA: a classic analysis of the results
EBITDA (earnings before interest, taxes, depreciation and provisions) translates the operating profit of a company. That is, revenues minus costs. However, it is necessary to focus on two aspects: first, EBITDA does not exclude extraordinary gains or losses. Where provided, please note that EBITDA does not address non-recurrent results. Then you should be aware that the increase in results is due to the growth of the billing or cutting costs.

• Debt: the indicator of the crisis to the fore
With all the constraints that the crisis to the finance market has become particularly important to consider the policy of companies in this case. The reports and accounts give you an indication of emissions put into the market as well as on the maturity of the debt. In absolute terms, you can see the ratio 'debt-to-equity', ie, debt as a percentage of equity.
• Provisions are essential to prevent future troubles
In a context of economic recession, the reserves today by enterprises could be very important to prevent a future debacle in the results. Many companies, especially banks, have increased their level of provisions for dealing with the prospect of increasing bad debts (not just the banks that see themselves as creditors) and potential losses resulting from, for example, impairments on holdings.

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Debt: the indicator of the crisis to the fore
With all the constraints that the crisis to the finance market has become particularly important to consider the policy of companies in this case. The reports and accounts give you an indication of emissions put into the market as well as on the maturity of the debt. In absolute terms, you can see the ratio 'debt-to-equity', ie, debt as a percentage of equity.

 
• Provisions are essential to prevent future troubles
In a context of economic recession, the reserves today by enterprises could be very important to prevent a future debacle in the results. Many companies, especially banks, have increased their level of provisions for dealing with the prospect of increasing bad debts and potential losses resulting from, for example, impairments on holdings.