© 2000 John Petroff
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© 2000 John Petroff |
12)- Using all available information sources
As described in Chapter 1, the major source of information about management strategy is the annual report. Management Discussion and Analysis of Business Conditions and Results of Operations (MDA) is very useful, but must be read with a little skepticism. It must also be compared to achievements or failures to reach the objectives stated in prior annual reports. In the annual report, there are usually notes to financial statements, graphs, regional or product breakdown, other writings about goals and plans that must all be balanced against the major thrust of MDA and against findings from analysis of individual expenses discussed above. A little more detail can be also found in SEC 10-K filings. If all the verbal and numerical material confirms trend, sensitivity and accounting conclusions, then the analyst can feel confident to make predictions. Otherwise, it may be necessary to search the data to find the core of the conflict and try to resolve it. The most convenient help would come from a company forecast of its results of operations for the coming year. Although, the SEC has reversed its position some thirty year ago, started to encourage companies to publish their projections, and even went not long ago as far as promising to exonerate any honest mistakes in such forecasts, few companies actually do publish their forecast. The only exception are highly diversified conglomerates (such as Fuqua) with sales and expenses which are rather stable, and which are obviously the easiest to forecast.
Chapter 1 also suggests information sources that an in-depth analysis would justify to use: newspaper articles, trade association journals, news conferences and key management interviews. An analyst may want to monitor the performance of a company over several months and years, to determine if the conclusions reached actually bear out. In this monitoring, an analyst is assisted by quarterly report filing with the SEC, but these reports are not entirely comparable with annual reports because they do not have year-end adjustments, and are not audited.
See review questions Q-13C12.1 through Q-13C12.7.
See research assignment R-13C12.1 through R-13C12.3.
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