Question

what information do you find in the md&a section of an annual report that is important in assessing the current and future earnings potential of a selected named company from annual reports published on the sec website, and why?

Answer 1

Going through the Colgate-Palmolive’s annual report- management discussions and analysis section, following points has come up which indicates towards the current and future potential of earnings:

1. Summarised description of the current years financial results in comparison with last years results.
2. The expected revenues in the upcoming years and prospective structure of the expenditures would going to indicate towards the future earnings potentials.
3. Company’s investments in the various contracts and projects alongwith their potential returns.
4. The R&D expenditures and resulting new brands/products creation in coming years which will increase earnings prospects.
5. Any unlocking values in the operations of the company or its subsidiaries, which can enhance the company’s earnings alongwith share price appreciation.
6. Forthsight of the foreign currency view of the management and its effect on the international businesses.
7. Credit risk exposures and management’s policies towards the treasury and financial risk controlling .
8. Management’s and Board views under the section towards the prospective organic and inorganic acquisitions and takeovers.

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