Sources of Financial Information

Importance of Financial Information:
An investor evaluates investment alternatives based on his risks and rewards and selects those investments that meet his objectives. An investment decision is thus made based on his projections of the future benefits from an investment. This calls for a study of the past, present and future performances of the economy, industry and stocks as investments and securities are in general affected by market and economic conditions, policy changes, national and international events, etc.

For a quick analysis and intelligent decision, investors collect information from various sources which are mostly secondary in nature as primary data is both time – consuming and costly. There are certain information providers who analyze the data for an easy understanding which forms an important source of information.

SOURCES OF COMPANY DATA:
The fundamental analysis and valuation of stocks calls for gathering and examination of the company’s specific data. Further, a considerable insight in respect of prospective return and risk of a security can be gained from going through the announcements and future plans often publicized by the companies. So, the company data, historic and futuristic, is of interest to the investors.

1. Company’s annual reports and prospectuses are the main sources of company data, the former being an annual feature of a public company and the latter being published while making public issue. The annual report contains the chairman’s speech, balance sheet and profit and loss account with explanatory notes and a review of the working of the company over the last 5 to 10 years. The chairman’s speech outlines the events that occurred in the previous year having a bearing on the company’s performance and how the company responded to those events. It also outlines what the company proposes to do in the next year. Some companies include in their annual reports also a statement of changes in financial position and a forecast of earnings for the next couple of years besides presenting the trends in earning per share, dividend per share, and their share prices vis-à-vis the market and industry indices. In the prospectuses, companies present a review of their working, the composition of their management team, and their future investment plans for which the capital is sought from the public.

2. Stock exchange official directory is another important source. It covers all the companies whose shares are listed on the stock exchange and gives for each company, its brief history, progress, and balance sheet and profit and loss account for a period of ten years. Moreover, important financial ratios, their trend over the last ten years and yearly high and low prices quoted for the company’s shares are presented as well in the directory.

3. Kothari’s Economic and Investment Guide of India, a yearly publication of the Kothari and Sons, is yet another important source of company data. This guide contains a lot of data on individual companies, their progress and management besides a good write – up on industry scenes.

4. In their regular feature columns such as investors’ guide, company profiles reports, company news and comments, and business notes, etc. The Economic Times, Financial Express, Business Standard, Commerce and Business India, and India Today present reports, comments, reviews of the working of individual companies, changes in company policy and management, future plans and prospects of the companies.

SOURCES OF INTERNATIONAL ECONOMIC DATA: In today’s interdependent world, the international economic, political, market, business and technological developments have a considerable bearing on the conditions and prospects prevailing in a country’s economy, the market, and for the business firms. The oil crisis of 1970s, the international financial (debt) crisis, and the growing protectionist attitude of the western countries whose effects are felt world over are the good examples of this impact. Some important sources of international data include the following:

1. International financial statistics, a monthly publication of the IMF provides each country’s yearly, quarterly and monthly data on major economic indicators such as GNP, money supply, consumer price index, stock market indices, currency exchange rate expressed in the US dollars, and balance of payment condition. The IMF also brings out occasionally supplementary documents on prices, production, balance of payments, exchange rates, etc., covering a long historical period.

2. Moody’s and Standard and Poor’s Industrial, banking and finance, transportation, utility and international manuals cover extensively the individual company profiles of both the US and international companies. For each company the historical background, the management team and a lot of financial information are provided in these manuals. The international manual provides the above information for a large segment of well – known foreign companies, the information being presented on a country – wise basis.

3. Capital International Perspective, a Geneva publication, reports on the various national stock market indices, world capital market, international interest rates, and capital flows.

4. The Financial Times of London, The Economist, a UK weekly, The Wall Street Journal, a US daily, Baron’s National Business and Financial Weekly of the USA, International Business Week, Fortune International and the far Eastern Economic Review are some of the international newspapers and periodicals that contain a lot of information on current international developments of interest to business executives and the investors.