Sources of Information about a Company

(3 of 7)

Sources of Information about a Company

When you need to research investment instruments that depend on the assets of a corporation—such as stocks and corporate bonds—the most detailed information comes from the companies themselves. Companies that issue securities are required to provide a variety of information about their assets, operations, and management that can be crucial to investors as they analyze the value of a specific investment.

Things To Know

  • A prospectus is a formal written offer to sell securities.
  • Annual and quarterly reports typically contain the company’s financial statements.

The prospectus

A prospectus is a formal written offer to sell securities. It contains information about the existing business, or the proposal for a new business, that investors need to make an informed decision about whether to invest in the security. Prospectuses for public offerings of securities must be filed with the Securities and Exchange Commission, and must abide by a stringent set of rules about the information they must disclose and how it is presented. In addition to information about the company’s financial status, a prospectus contains the company history, details on operations, the names of its key managers, and a listing of any litigation pending against the company. Mutual funds also issue prospectuses that provide information about the funds’ managements, assets, and investment strategies.

The annual report

Even more detail may be found in a company’s annual report, although annual reports are often as much corporate image pieces as financial disclosure instruments. Annual reports typically are sent to every shareholder and can be obtained directly from the company. There are also services that specialize in collecting annual reports and making them available for a nominal charge. Annual reports typically contain the company’s consolidated financial statements, an analysis of its cash flows, and the report of the independent accountants who audit the company’s finances. You’ll also find a review of operations, a listing of officers and directors, highlights of the company’s fiscal year, and management’s discussion and analysis of the company’s financial reports.

Quarterly reports

Publicly held companies also issue reports throughout the fiscal year, usually each business quarter. They are required to file these reports with the SEC. Quarterly reports include updates on sales or revenue, net income, expenses, changes in company assets, and any significant change in the financial situation of the company. Quarterly reports signal to investors whether companies are in line with their revenue projections, and can trigger significant changes in the value and prices of the company’s securities.

These company sources provide the information investors need to analyze a company’s business and securities in their quest to pick a winning investment.