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NISM Certifications · NISM-Series-XV: Research Analyst · Qualities of a Good Research Report

A report on Kaveri Foods Ltd states: 'Net profit rose to ₹120 crore from ₹100 crore, so the company is highly profitable.' Revenue rose from ₹1,000 crore to ₹1,100 crore. Which is the most appropriate improvement for a good report?

The report should add margin analysis with explanation. Net margin improved from 10.0% (100/1000) to about 10.9% (120/1100), and the analyst should explain the drivers and any one-off items. Bare claims, guarantees of growth or removing comparatives reduce the report's analytical quality.

  1. AReplace the net profit figure with only the revenue figure
  2. BAdd margin analysis: net margin moved from 10.0% to about 10.9%, and explain the drivers and any one-off itemsCorrect
  3. CState that profit growth of 20% guarantees future growth
  4. DRemove the prior year comparison to avoid confusion

Explanation

Net margin = 100/1000 = 10.0% last year and 120/1100 = 10.9% this year. A good report interprets the numbers with ratios, drivers and one-offs, rather than making unsupported claims or dropping comparatives. Guaranteeing future growth is unsupported.

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