Normally, the statement starts with updating the public about how the business fares and the last few paragraphs would be about the company’s hopes and expectations in the immediate future.

So whilst reading the statements, we should actively ask ourselves some of the following questions:

• Are the statements made by the Chairman realistic in terms of the present economic situation or within the same industry? Are they too overwhelmingly optimistic or too theoretical ?

• Does the Chairman appear to be very confident about the future?

• Is there an underlying warning about a possible decline in profit or liquidity?

• Does the statements frequently points to explanations and excuses for the company’s poor performance like intense competition, high rises in cost of production, new restrictive legislations and any other things that affect the company’s profitability.

• For loss making or ailing companies that are undergoing restructuring, the steps undertaken and its progress to revive the company will be explained. A lot of hint on how it’s impact the liquidity of the company and ultimately whether the company needs additional cash calls from within or from further supports from the external lenders/bankers.
  

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