Which Financial Indicators In The Annual Report Deserve The Most Attention?

Unless it is a company that pays special attention to itself or a person engaged in financial fraud, it is not necessary for a general investor to finish reading an annual report from beginning to end. Indeed, there is no such thing as spare time. For the vast majority of annual reports that are not included in the stock pool, simply looking at key indicators is enough.

But as a dress advertisement says, "simple and not simple", it is too simple for investors to take a look at earnings per share and net assets per share. In my view, the selection of several key indicators in the annual report is enough to solve the overwhelming majority of problems.

The main financial data of the 2011 Annual Report of listed companies on the seventy-third page of the first issue of the "red weekly" column, the key financial indicators listed therein are sufficient, including the earnings per share and net asset comparison data, net asset yield, operating cash flow per share, operating income and net profit data and year-on-year growth, the number of shareholders and the rate of change in annulus ratio. Using these indicators to consider the performance quality of listed companies is more conducive to understand the final indicator, that is, the source of earnings per share.

Of course, strictly speaking, the replacement of net profit by operating profit is more conducive to the analysis of real profitability, because the impact of non recurring gains and losses on net profit is relatively large. Many companies rely on financial subsidies to live on, which is still strong in terms of net profit and earnings per share. But in fact, the business of the company is just a mere shelf.

Analysis of these key points financial index The relationship can be summed up as follows: 1, net profit growth supported by operating income growth is not worth money; 2, net profit without net cash flow of operating cash is not reliable; 3, net profit that does not lead to net assets increase is digital game.

First look Business income There is a correlation between growth and net profit growth. In view of the existence of operating leverage, the fluctuation of corporate net profit should be slightly larger than that of operating revenue theoretically. In the real enterprise analysis, it is reasonable to see that the deviation of the two variables is not too far away. After excluding the effects of non recurring gains and losses, if the net profit growth is significantly higher than the increase in operating income, it is necessary to pay attention to whether the business profitability represented by gross profit margin has improved, such as product price increase and so on, as evidently occurred in the listed companies of fluorine chemical industry last year, which needs to pay attention to whether the products after the price increase may be faced with a fall in price and damage the sustainability of profitability, such as the rare earth listed companies have encountered such a situation.

If Net profit The growth rate is significantly lower than the revenue, which is often not good. It may be faced with the fact that the industry competition is aggravating and damaging the core profitability.

Without the increase of capital and stock expansion, the realization of net profit should also lead to an increase in the same amount of net assets. If not, it is necessary to pay attention to whether it is due to the sale of the available financial assets for external sale, which leads to the realization of the investment income in the profit table which was originally included in capital reserve. If so, it is only a digital game, and does not mean that the profitability is enhanced.

The most noteworthy fact is whether the difference between net profit and net cash inflow of operating cash is too large. In the ideal state, the net inflow of operating cash should be slightly higher than net profit by depreciation and other non payment costs. If the net profit is significantly lower than 80%, there is a problem. Either a substantial increase in receivables or a large backlog of stocks may lead to a substantial reduction of cash flow in theory.