Syndicate
Analysis of the Current Asset
When you examine the current asset of a society, give special attention to the item denominated “negotiable securities.” These securities represent shares and debentures that the company has as a way of investment. This item, however, can frequently become into a kind of “backstage” in which assets are hidden; so then, every time you discover a balance sheet with the epigraph “negotiable securities,” be sure that the figures shown represent the costs of the securities or their value on the market. In several occasions, the companies show in their balance the cost of some securities that were bought several years ago. On such cases, the true value of the company (the value of its parts against the whole) might be lessen and the analyst, discarding the cost has to put instead in its place the actual value of those securities.
The Annual Report
The question of the value of cost besides the market value, such as raised on the purpose of the negotiable securities on the market, demonstrates us the importance of reviewing the final notes in the annual report of a society.
Most of the professional security analysts read the annual reports from back to front, due that they believe that, if a company has any problems, this will be hidden at the footnotes. The number of notes that accompany the annual report of a company may also give the analyst an idea about the quality of its sales and benefit figures.
Has the society made use of all the accounting rules to better the presentation of its benefits?
As a general rule, the more notes that are annexed to an annual report, the more you will have to study its figures, and the possibility that the management has manipulated them. The analyst also has to see if the external audit has issued an opinion with qualifications and, in case they have, what reach and significance do these have.
If an individual investor wants to have a complete image of the society, he should examine, its 10k. 10k is the report that societies must present to the SEC, where it is filed and it can be examined by anyone who desires to. You can also consult this report in the pages of the SEC on the Internet; it goes by the name of “Edgar”. There you can find all the documents of the societies that are quoted at the stock exchange market, among them there are the perceptive reports about the changes in the security portfolios of the directors of the society and the quarterly reports called 10-Q.
The annual report that is distributed to the shareholders is a simplified copy of the 10k report. If well it contains almost all the information that is required by the SEC.
After adding some graphics to illustrate the progress of the year, many societies are accustomed to bind the 10k report with some showy cover and in this way they deliver it to the shareholders as if it where the annual report.
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