Investor Blueprint 5.1 THE ANNUAL REPORT

Objectives Goals Discuss what an annual report is all about. Describe the major sections of an annual report.

The Company Report Card annual report yearly record summarizing the financial condition of a corporation distributed to shareholders

Most major annual reports contain the following sections:

Corporate Profile describes the company’s business might include information about where the company does business

Financial Highlights  Summary of annual “numbers

Diversify your Investments

Letter to Shareholders “report from management” communicates about company and its future

Operational Overview discusses company’s products or services highlights significant events or accomplishments

Independent Auditors’ Report CPAs inspect company records “clean opinion” “qualified opinion”

Financial Statements heart of annual report balance sheet income statement

contains accounting terminology that experienced investors interpret Notes to Financial Statements

detailed section discusses how money was gained or lost in various business segments Management Discussion and Analysis

brief description of nature of company’s business Description of the Company’s Business

explains what percentage of the company is dedicated to various business segments Business Segment Information

members of the board of directors broad strategy and policy decisions top level officers run business daily Company Directors and Executive Officers

summarizes key financial data for previous five years FIVE-YEAR HISTORICAL FINANCIAL DATA SUMMARY

Investor Blueprint 5.2 INCOME STATEMENT

Objectives Distinguish between the time frames of an income statement and a balance sheet. Identify terms found in income statements.

income statement indicates a business’s financial performance over a specific period of time revenue the earnings of a business expenses operating costs resulting from running the business The income statement is sometimes called the profit and loss statement. Income Statement

top line net sales or revenues Net Sales = Gross Sales – Returns and Allowances Companies often set goals by designating a particular number for the top line and trying to manage the business to obtain that number. Sales or Revenues

cost of goods sold (or cost of sales) the operating expenses incurred by producing the company’s products and services labor raw materials other related expenses Cost of Goods Sold

Gross Profit = Revenues – CGS Gross Profit

SG&A Operating expenses not directly related to manufacturing of product sales commissions legal expenses accounting expenses advertising executive compensation Selling, General and Administrative Expenses (SG&A)

helps evaluate the success or failure of company operations Operating Income = Net Sales – CGS – SG&A Operating Income

other income interest and dividends on securities owned by the company other investment related activities gains from asset sales other expenses interest paid on company debt miscellaneous expenses Other Income (Expenses)

income before taxes (pre-tax income) operating income plus any non-operating income or minus any non-operating expenses before corporate income taxes INCOME BEFORE TAXES

bottom line The bottom line is the net income. an important goal in companies Net Income = Net Sales – Expenses and Taxes Net Income

Earnings Per Share (EPS)

Investor Blueprint 5.3 BALANCE SHEET

Objectives Distinguish between the time frames of an income statement and a balance sheet. Identify terms found in balance sheets.