- 1). Establish the reason you need the data. Financial analysts often complain of analysis paralysis. The more financial data you have, the more you have to analyze, and some financial data can be conflicting. It helps if you determine the exact need for the data; that is, what question are you trying to answer or resolve.
- 2). Go directly to the source. If you're researching a company for its fundamentals and need information about financial viability, asset level, profitability, or cash flow, go directly to the company's Investor Relations department for assistance. Request the annual report, which contains three financial statements: the balance sheet, income statement and cash flow statement. It also provides a summary of operations by management. Investment research websites can be faster to look up, but the information isn't always correct.
- 3). Compare data to previous years. This helps to provide a basis for comparison. If a company's sales are $100,000, it helps to know what they were the year before to see if they are growing or declining. Remember, your goals is to create a story around the data.
- 4). Compare financial data to other companies in the same industry. This provides an additional level of comparison. Use percentages for company-to-company comparison. For instance, if you want to compare net income, divide net income by sales for a percentage and use this number to compare against other companies.
- 5). Find the story. Once you look through the annual report, a story will begin to emerge. You will be able to see the same story throughout the annual report. If you can define the financial story, you can read the data.
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