Simply put, a company’s financials can be intimidating. But if you have a 401k, own stocks as investments or want to start investing, a basic knowledge of a company’s financial performance can help you better understand the financial health of your investments.
Read about the company’s products and services to better understand what the company does – and how it makes money. Look for a breakdown of the percent of revenue generated from each area. There may be a surprising diversity of products and services a company offers.
In lieu of a crystal ball, a great way to understand where a company is headed is to read the commentary in the earnings reports, transcripts from investor events, and the annual report. All of these give insights into the leadership’s vision and strategy for the future. They may also signal a period of growth or change for a company.
There are key reporting measurements in every industry that indicate how a company is doing financially. In banking, for instance, three key metrics are often used to give a high-level assessment of performance.
See if you can apply these learnings to the U.S. Bancorp annual report.