C01 · Lesson 1 of 27 · 12 min · 4 hands-on tasks
Reading an Annual Report
A company's annual report runs to a hundred pages. Analysts don't read it front to back. Learn the order they read it in, find the numbers that matter in seconds, and know which pages are facts and which are a sales pitch.
🎬 Situation
Meet Ana. She's just joined the lending team at Kestrel Bank, and her first file is Larkfield Outdoor: 40 shops selling tents, boots and bikes, plus a website.
Larkfield wants to borrow $60 million to open 12 new stores. Ana's boss, Dev, hands her Larkfield's annual report. "112 pages. Tell me by Friday if we should lend."
This whole course follows Ana through that report, one part at a time, until she makes the call.
🎮 Play
Find it in the report. Here are Larkfield's three statements, in millions of dollars, this year next to last year. Do each task at the top by tapping the line. Tap any line any time to see what it means.
| 2025 | 2024 | |
|---|---|---|
| 1,200 | 1,080 | |
| (720) | (659) | |
| 480 | 421 | |
| (312) | (281) | |
| (48) | (44) | |
| 120 | 96 | |
| (20) | (18) | |
| 100 | 78 | |
| (25) | (19) | |
| 75 | 59 |
Tap a line name; switch statements with the tabs. Numbers in (brackets) are negative.
- Find this year's sales: the top line.
- Find the bottom line: what's left for shareholders after every cost, interest and tax.
- Find how much cash Larkfield had in the bank on 31 December 2025.
- Larkfield owes lenders money in two places. Tap both.
- Find the cash the everyday business produced this year.
Read it in the right order. Step through how Ana tackles the 112 pages.
🏷️ Name it
| Part | What it is | Trust level |
|---|---|---|
| Annual report (in the US, the 10-K) | The yearly report every listed company must publish | |
| Auditor's report | An independent accounting firm's opinion on the statements | Read first |
| Clean (unqualified) opinion | "These statements fairly follow the rules" | The normal, good result |
| Going-concern warning | The auditor doubts the company can survive the next year | A loud alarm |
| The three statements | Income statement, balance sheet, cash flow statement | Audited |
| Notes | The pages that explain how each number was made | Audited, and full of clues |
| Management's discussion and analysis (MD&A) | Management explains results, risks and plans | Not audited: management's view |
| Letter to shareholders | The CEO's message at the front | Marketing |
| Comparative columns | This year beside last year | Always compare them |
| Fiscal year | The 12 months the report covers (not always January to December) |
🖍️ Like you're five: your school report has a teacher's grades and your own "about me" page. You'd believe the grades first. The statements are the grades, the auditor is the teacher's signature, and the CEO's letter is the "about me" page.
Read the units first. "In millions" means 1,200 is $1.2 billion. Brackets mean negative. And a balance sheet is a photo of one day, while the income and cash flow statements are a video of the whole year.
Real life: US companies' reports are free on the SEC's EDGAR website; listed companies elsewhere publish them on their investor-relations pages. Professional analysts often spend more time in the notes than in the statements, because that's where the choices are explained. The next lesson shows how the three statements fit together like gears.
🔨 Do it: 4 tasks
0 / 4 doneTask 1 of 4 · How fast did sales grow?
Larkfield's revenue was $1,080 million in 2024 and $1,200 million in 2025. By what percent did it grow?
Task 2 of 4 · And the stock on the shelves?
Larkfield's inventory went from $215 million to $260 million. By what percent did it grow?
Task 3 of 4 · How much does it owe lenders?
Larkfield owes $20 million of short-term debt and $230 million of long-term debt. What's its total debt, in millions?
Task 4 of 4 · The reading order
Put the parts of the report in the order an analyst reads them.
Tap two items to swap them, or use the arrows.
🧩 Case: The glossy front pages
⭐ VIPAna's first file: Larkfield Outdoor wants to borrow $60 million to open 12 new stores. The CEO's letter on page 2 says: "Record sales! Our best year ever, and the strongest balance sheet in our history." Ana has a meeting with her boss, Dev, in an hour.
How should Ana use the CEO's letter?
What would you do? VIP members make the call, see what happens next across 3 decisions, and get the expert debrief.
🔁 Remember it
A "clean" (unqualified) auditor's opinion means...
Where do you find how a company chose to count revenue or value its inventory?
"(45)" in a financial statement means...
Read an annual report like an analyst: the auditor's opinion first, then the three statements (two years side by side), then the notes that explain them, then management's discussion. Read the shareholder letter last: it's marketing.
📅 Use it Monday
Download the annual report of a company you know (US companies: search the name plus "10-K"). Spend 10 minutes: read the auditor's opinion, then find revenue, net income, cash and total debt for both years. Which number grew fastest?
Create a free account to track your progress.