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Management discussion and analysis (MD&A) is defined as a section of an annual report released by a company in which the company’s management gives a conclusive and elaborate discussion of various past and present aspects of the company. It is actually termed as an integrated section of the financial annual reports and statements of a given company.
There are various items disclosed in this section of financial reports of a company:
Firstly, this section discloses information necessary to enable the reader to understand the financial condition of a company at hand, any changes on the financial condition and the financial results of various operations held in the company. In specific, this section provides an elaborate preview of operations held by the company during the previous years and how it fared on in terms of those operations. Major plans concerning various anticipated projects underway and in upcoming year and future goals and the approaches to be employed in the new goals and projects are included in the discussion.
This section also discloses vital information that is a true explanation of the financial statements of a company and this is very important, since potential investors are able to scrutinize the company’s performance in the management’s eye. The section also provides information which helps to enhance the disclosure of the overall financial situation of the company and give clear context in which the financial information of the company should be analyzed. The section gives clear and elaborate information concerning the quality of the earnings of the company, the potential variability of its earnings, and the cash flow in place to enable interested investors to evaluate and link the past performance as the main indicator or likely determinant of the company’s performance in future.
In summary, this section discloses the liquidity position of the company, the capital resources at hand, operations outcomes, the causes of material changes in the provided financial statements, unusual events like mergers and acquisitions, trends recorded (both positive as well as negative), outs of inflation, risks involved in markets and other uncertainties that were significant.