Annual reports are the major source for financial statement analysis. They provide much of the information users need to make economic decisions about businesses.  Besides these the stock exchange reports, business periodicals and reports by credit and investment advisory services are also major sources for financial statement analysis. Let us discuss about the different sources of information for analysis.

Reports Published by the Company

Nowadays the annual reports of the companies are very comprehensive. So, naturally annual reports are the major source for financial analysis.  Already we know that the main parts of the annual reports are: (a) Financial Statements, (b) Auditor's Reports, (c) Management's analysis of past year's operations (i.e., management and discussion analysis), (d) Notes to the Financial Statements, and  (e) a summary of operations of five or ten year period.  Now companies are publishing interim financial reports. These are unaudited reports. So care should be taken while using these statements for analysis. These statements give the signals about the significant changes in company's earnings trend.

Stock Exchange Reports

All public companies must file their annual, quarterly and current reports to the stock exchange authorities. These statements are available to the general public for a small charge. Generally, the companies submit their forms in a specified format. More information about the financial statements is available in these reports than in the published annual reports. Quarterly reports and interim reports submitted to the stock exchanges give valuable information. For example, in the US the companies must submit current report (Form 8-K) within a few days from the date of the occurrence of a certain significant event. These reports are very important because these are the first indicators of important changes that may affect the company's financial performance in the future. Now, all the reports are available in the stock exchange websites.

Business Periodicals and Credit and Investment Advisory Services

Financial analysts must keep in touch with the events in the financial world. The best sources of financial news are the magazines or newspapers published by the stock exchanges. They give information about day-to-day changes in the business environment. Periodicals like - Business Week, ICFAI's Analyst magazine, Forbes and Fortune are very helpful magazines for financial information.  For further financial information about the companies, the publications brought out by Standard & Poor's and Reuters are useful.  Data on industry norms, average ratios and relationships and credit ratings are available from credit rating agencies like CRISIL, ICRA, CARE and ONICRA. These agencies' reports and studies provide a lot of information to the financial analysts. Some agencies provide financial information in a summarized form, which will help for analyzing and calculating various ratios.

OTHER SOURCES

In addition to the above sources there is some other source, which provides data about the company. For example, most academic libraries and public libraries may have computerized search system and computerized database available that can be useful for the financial analysis. Some Internet websites also provide the past and present data of various companies.

Today, a number of computerized search systems and computer databases exist that greatly facilitate financial analysis of companies. These research materials and information supplements enhance the analytical process. In fact, these sources provide periodical information and broad array of it than those disclosed in the financial statements of companies. Newspapers, company websites and more particularly financial media inform about significant company events on a daily basis. The easiest source to keep abreast of the events of different companies is to read the financial newspapers such as Economic Times, Financial Express, etc. The next is to read weekly and monthly periodicals eg. India Today, Trade journals. In addition to giving specific information on the companies desired by the analyst, they also provide economic, industry and other information required for a holistic view on the company performance.

However, there are several grounds on which financial statements are comparatively more advantageous over other sources of information. They are:

• Financial statement information is more reliable than other information sources. The existence of auditors to certify the financial statements can be perceived as the rationale for reliability.

• The information from financial statements can be said to be very cost effective information. External sources of information are costlier since most agencies provide accessibility to databases on the payment of fees.

• Financial statements are general purpose financial information fit for various interested parties. However, other sources of information may be for specific purpose and cannot be used as a basis for decision-making by all parties.

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