Deciphering Annual Reports
Moneylife Digital Team 02 March 2016
The Moneylife columnist teaches investors how to get behind the numbers
 
R Balakrishnan, a columnist with Moneylife, gave valuable insights into reading annual reports, from an investor’s perspective, in the second Investor Club event conducted by Moneylife Smart Savers Network (MSSN). With four decades of experience in financial markets, he guided the audience, right from understanding the basics of financial statements, to digging deeper into issues, like capitalisation of the interest cost and detecting the red flags. Finance can be boring for many; but not when the speaker has wit and humour in his presentation. Mr Balakrishnan had many funny quips about annual reports. 
 
Annual reports can be bulky, sometimes running into more than 200 pages. Mr Balakrishnan highlighted the importance of examining a few critical ratios. He explained that return on equity (RoE) and return on capital employed (RoCE) are the most important ratios, while evaluating companies. This is because companies need to earn more than the cost of funds; otherwise, they are not adding any value. Speaking of debt, he remarked, “New companies will start with debt. Over time, they should become debt-free.” Highlighting the importance of analysing cash-flows, he called cash-flows the single most important source of finding problem areas. 
 
Taking up the case study of Hindustan Unilever Ltd (HUL) and Inox Wind, he explained the method to analyse stocks, diligently going through different calculations. Explaining the business model of Inox Wind, he took the audience through the detailed Excel sheets. 
 
The session, sponsored by Bombay Stock Exchange and Kotak Securities, ended with a comprehensive question & answer session. The questions from the audience covered a wide gamut of issues ranging from macroeconomics to company-specific issues.
Comments
MK
6 years ago
Would be great if you could upload the video for the benefit of people who were unable to attend.
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