R Balakrishnan, a columnist with Moneylife, gave valuable insights into reading annual reports, from an investor’s perspective, in the second Investor Club event conducted by Moneylife Smart Savers Network (MSSN). With four decades of experience in financial markets, he guided the audience, right from understanding the basics of financial statements, to digging deeper into issues, like capitalisation of the interest cost and detecting the red flags. Finance can be boring for many; but not when the speaker has wit and humour in his presentation. Mr Balakrishnan had many funny quips about annual reports. 
Annual reports can be bulky, sometimes running into more than 200 pages. Mr Balakrishnan highlighted the importance of examining a few critical ratios. He explained that return on equity (RoE) and return on capital employed (RoCE) are the most important ratios, while evaluating companies. This is because companies need to earn more than the cost of funds; otherwise, they are not adding any value. Speaking of debt, he remarked, “New companies will start with debt. Over time, they should become debt-free.” Highlighting the importance of analysing cash-flows, he called cash-flows the single most important source of finding problem areas. 
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