ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Sunday, May 26, 1996 TAG: 9605240023
SECTION: BUSINESS PAGE: 1 EDITION: METRO
SOURCE: TOM SHEAN LANDMARK NEWS SERVICE
The least inviting parts of any annual report are in the back. The dense footnotes and long rows of numbers lack exciting photos, but they often provide valuable information about a company's financial condition and its prospects.
Securities analysts, money managers and others who regularly use annual reports say they often begin in the back and skip around, said Guy W. Ford, research director at the Richmond-based brokerage firm Scott & Stringfellow Inc.
Annual reports vary widely in their appearance and message, but all have some key parts worth checking:
* Footnotes to the financial statements.
These describe the ways that a company arrived at the numbers it reported. They shed light on such details as taxes, methods of depreciation and retirement benefits.
Some footnotes also disclose environmental problems and other difficulties a company may be facing, and the management's discussion and analysis of financial condition and results of operations.
* Report of the independent auditors.
The job of outside auditors is to verify that the company's accounting methods comply with generally accepted accounting principles. Auditors also check the company's internal controls for protecting its assets and curbing dishonesty.
If they determine that the company's financial statements don't conform to generally accepted accounting principles or discover other serious problems, auditors will mention this in their letter.
* The company's proxy statement.
This is a separate document listing issues being put to a shareholder vote. The proxy statement provides abundant information about the compensation of executives and outside directors, ownership of large blocks of stock, and business relationships that officers and directors have with the company.
Scott & Stringfellow's Ford said he regularly checks proxy statements to determine who the company's biggest shareholders are, who the directors are, and how much of the company's stock they own. Proxy statements also include a chart comparing the price performance of the company's stock with broader stock market measures, such as the Standard & Poor's 500 index.
The best reading is in the backa
LENGTH: Medium: 51 linesby CNB