Saturday 26 December 2009

The Footnotes

The Footnotes and Supplementary Information to Financial Statements

The notes are an integral part of the financial statements, and the statements can be interpreted only with a thorough reading of the notes.   A lot of information on the financial statements are embellished in the footnotes.

You will see that the footnotes are supplemented with a background discussion of the firm - its strategy, area of operations, product portfolio, product development, marketing, manufacturing, and order backlog.  There may be a discussion of regulations applying to the firm and a reveiw of factors affecting the company's business and its prospects.  Details of executive compensation also are given.  This material, along with the more detailed formal annual report, is an aid to knowing the business but is by no means complete.  The industry analyst should know considerably more about the industry before attempting to research a company.

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