What can I learn from disclosure documents?
- Does this company have a good track record? You'll find out if it's making or losing money and whether it has been growing. Companies that have a good track record of growth over many years may be likely to increase their share price in the future in a steady way.
- Does this company have the potential to grow? The disclosure documents tell you what business it's in, who it competes with, and how it plans to grow.
- What things can affect the future of this company? A recent prospectus will tell you about the possible future risks. The section on risk factors warns you about anything that could affect the company's success.
What are some of the warning signs?
Make sure you find out:
- Is the company trying something new and untested? If yes, who are its competitors and how successful are they? If other players are more established, this company may have a tough time breaking into the market.
- Are there signs the company will need financing soon? If so, what are its plans for raising funds? If the company borrows money a lot, it may need more money again in the future.
- Do the company's directors and other officers have a solid track record of success? How are they compensated? Do their salaries seem reasonable compared to how the company is doing? How much of the company do the directors and officers own? Have any directors ever been in trouble with regulators?
After all the recent scandals, investors need to pay close attention to the people who are running the business. A strong management team can make the difference between a successful company and a company that is failing. That?s one reason people are a lot more interested in corporate governance today. Learn more now .
Remember: A company's past success is no guarantee of future growth
Results may be strongly affected by general economic and stock market trends. Sudden bad news can also send a stock price falling.
You'll find many documents at the (SEDAR). SEDAR is the official website where public companies file documents required by securities laws in Canada. Investors can search the SEDAR site by date, document type, company name, or industry sector.
To research past stock prices, you can get some information free from Internet sources such as or . website offers more detailed historical information for a fee.
To find out if a company is publicly or privately held, check with the Ontario Ministry of Government Services, . You can get information about an Ontario corporation, including its registered or head office address or the names of the directors and officers of the corporation.
Content in this section is provided in partnership with the Investor Education Fund, a non-profit organization promoting financial literacy to Canadians. To find out more go to GetSmarterAboutMoney.ca.