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.