Question

Name the major sections of a publicly traded company's corporate annual reports (10K statement). Why is the Management Discussion & Analysis required for annual reports?

Answer 1

The Management’s Discussion and Analysis (MD&A) is an important disclosure in an annual report because it summarizes the financials and relays management’s insights into the company’s performance. Unlike other disclosures, it is written as a narrative, which allows it to offer key information in a more digestible way.

According to the SEC, the MD&A has three primary purposes:

1. To provide a narrative explanation of a company’s financial statements that enables investors to see the company through the eyes of management.
2. To enhance the overall financial disclosure by providing context.
3. To provide information about the company’s earnings and cash flow so that investors can ascertain the likelihood that past performance is indicative of future performance.