3. MAJOR FINANCIAL STATEMENTS AND OTHER INFORMATION SOURCES

In order to perform an equity or credit analysis of a company, an analyst collects a great deal of information. The nature of the information collected will vary on the basis of the individual decision to be made (or the specific purpose of the analysis) but will typically include information about the economy, industry, and company as well as information about comparable peer companies. Much of the information will likely come from outside the company, such as economic statistics, industry reports, trade publications, and databases containing information on competitors. The company itself provides some of the core information for analysis in its financial reports, press releases, investor conference calls, and webcasts.

Companies prepare financial reports at regular intervals (annually, semiannually, and/or quarterly depending on the applicable regulatory requirements). Financial reports include financial statements along with supplemental disclosures necessary to assess the company’s financial position and periodic performance. Financial statements are the result of an accounting recordkeeping process that records economic activities of a company, following the applicable accounting standards and principles. These statements summarize the accounting information, mainly for users outside the company (such as investors, creditors, analysts, and others) because users of financial information inside a company have direct access to the underlying financial data that are summarized in the financial statements and to other information that is collected but not included in the financial reporting process. Financial statements are almost always audited by independent accountants who provide an opinion on whether the financial statements present fairly the company’s performance and financial position in accordance with a specified, applicable set of accounting standards and principles.