If you do not receive company reports because your shares are held by a nominee, you can arrange to get them. To avoid additional cost, a useful source is the Financial Times, which has a free service.

Annual report and accounts

This is usually a glossy affair which the company uses for publicity and marketing. It is also long and wordy because parts are required by law.

To find out what really matters without reading it all, consider the following:

Summary

Read this first. It will be at or near the beginning and may be called 'Financial Highlights'. Compare this year's figures with last year's. Look especially at earnings per share (EPS) as this is the most valuable statistic. EPS is profit for the period divided by the number of shares in issue.

Chairman's statement

This summarises the results but it is not a legal document so it will be slanted favourably. The most important paragraph is prospects, usually near the end.

Directors' report

See if there are any changes in accounting practice, which must be reported here. If there are any, have the previous year's figures been adjusted for comparison?

Auditors' report

Is it 'clean': in other words have they not said there is anything wrong?

Profit and loss account

You will have already seen the important figures in the summary but in the profit and loss account you will find a useful analysis of profit between ongoing businesses and (if any) new or discontinued businesses. Balance sheet

Look at the group balance sheet if there is one. Compare each item with last year and think about any wide deviations, looking at the relevant notes. Look particularly at net current assets and borrowings. Cash flow Is there a net inflow or outflow? In the latter case try.to work out why, in case it is a warning. (Fast growing companies can be highly profitable but still run out of cash.)

Notes on the accounts

Read the note relating to directors' pay: always of interest!

List of directors

Does the company have non executive directors and if so do they seem powerful enough to stand up to the executives?

Interim report

This is usually quite brief. It shows figures for the first half of the current year compared with the same period last year and the last full year.

The figures will not have been audited and there may not be a balance sheet or cash flow statement. Watch out for any accounting changes which affect the comparison.

There will probably be a short chairman's statement, including a comment on prospects.

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