Emma is an avid football fan and a supporter of Arsenal
football club. Every morning, afternoon and night he gets alerts via a number
of sports news outlets informing him of activities about his club and sports in
general.
He is so vast in sports, he hardly loses any argument. However, he is
a Banker and also has a portfolio of investments which includes shares that he
manages by himself. Unlike his favorite club and love for sports he doesn’t
keep tabs on his investments as much as he does with the former. It was so bad
he lost most of his investments including shares in the bank that he worked in
which eventually went under.
As a shareholder of a company you are entitled to receive a
number of information from your company periodically and at specified periods
during the financial year. These information come via various medium such as
reports, bulletins, earnings guidance, newsletters, public announcements etc.
Let’s take a lot at the critical ones.
Annual Reports: At the end of a financial year every company
by law is required to prepare its financial statements and have it audited.
After it is audited and approved by the board of directors it is packaged in an
annual report and distributed to shareholders at the Annual General Meeting.
Copies of the annual report can also be downloaded online. An annual report
contains amongst others the company’s result for year, the chairman’s
statement, auditor’s opinion, dividends declare amongst others. It is one of
the most important documents issued by a company
Interim Financial Reports: Interim Financial reports are
released quarterly all through the financial year and contain financial
statements of the company for the period under review. Unlike the annual
report, interim reports do not need to be audited and do not contain as much
information as annual reports. However, they do reveal the financial state of
the company which you can then use to make sound investment decisions.
Corporate Announcements: During the year companies also take
a lot of non-financial decisions which can have impact on their future. For
example, they can announce a change of directors, chairmen or CEO. It could
also be that they have relocated office or change the memorandum and articles
of association of the company. It also includes dividend announcements,
financial forecast, public offers etc. Corporate announcement are a very
crucial part of a company’s financial cycle and should be taken seriously by
every investor.
Corporate Deals: Deals such as mergers and acquisitions,
takeovers, spin offs, debt offerings etc. are an important event in any
company’s financial year. Before they are concluded they are often announced in
the media or through appropriate channels for shareholders and other
stakeholders to digest and offer opinions. It is so important to follow these
events as every move the company makes can affect the financial state of the
company either positively or negatively which off course affects your
investments. Deals are typically announced in the pages of newspapers, business
news websites, on TV, social media etc.
Product & Services: Every company exist to either sell a
product or a service and as such to keep up with competition, trends and
technology they release newer version of what they sell. New product and
services are often announced across various media platforms and are followed by
several promotional activities. As a shareholder, it is important that you know
which product or service your company is selling and how well they are
perceived in the market. If their products or service is not very well received
then it is very likely that the company will lose money which will lead to
erosion of your value in the business.
Capital Expenditure (Capex): Companies also spend a lot
of money on property, plants and equipment, motor vehicle, computers, etc.
which they need to ensure they carry out their operations effectively. Capex
involves utilizing a huge chunk of a company’s cash pile and when spent
unwisely can lead to the company losing millions if not billions of Naira. That
is why whenever a company wants to embark on a huge capex spend such as capacity
expansion, increase in branch network etc. it is usually scrutinized by
stakeholders who review to check if it is a worthwhile expenditure. As a
shareholder, it is important that you track what your company is doing with
your money such that if you feel the capex may impair on the company’s finances
you can liquidate your investment with them before it is too late.
Legal Pronouncements: Companies can sue or be sued in the
course of their operations. Whenever a quoted company is sued or sues another
party it is quite often that they make this public. They also highlight the
potential consequence of the legal action for stakeholders to digest and decide
if it will impact on their investments. A negative judgment against a company
can cost them serious money and damage a brand eventually impacting on the
value and perception of the company. For example, the well-publicized lawsuit
between Samsung and Apple can potentially cost either side billions of dollars
in revenues lost as well as market share. Law suits are also very expensive and
are written off the company’s income thus impacting on profitability.
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