What you read first

An annual report runs to hundreds of pages. Analysts always start with the same four numbers.

First number: the margin. Out of each euro sold, how much is left once everything is paid?

Say a company sells one million euros' worth, and keeps one hundred thousand euros of profit. Its margin: ten per cent.

Ten cents per euro sold. Another, with the same revenue, keeps only thirty thousand: three cents.

The one at three cents is fragile. A small rise in costs, and its margin disappears.

Second number: growth. But revenue growth first, not profit growth.

One company sells twenty per cent more, with the same margin. Its profit goes from one hundred thousand to one hundred and twenty thousand euros.

Another does not sell a single extra euro, but cuts its costs. Its profit goes from one hundred thousand to one hundred and fifty thousand.

Up fifty per cent! On paper, it is the best. But you cannot cut costs every year.

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Profit can rise without new customers. Rising sales mean people are buying.

Third number: net debt. It is debt, minus the cash on hand.

Five hundred thousand euros of debt, but four hundred thousand in the bank? Net debt is only one hundred thousand.

To know if it is a lot, compare it with profit. How many years of profit would it take to repay it all?

Three hundred thousand of net debt for one hundred thousand of profit a year: three years. Beyond a few years, look closely.

Fourth number, the least known: working capital needs. The money tied up to keep the business running.

A company buys its stock before selling it. And it often sells before being paid.

Stock: one hundred and fifty thousand. Unpaid customer invoices: two hundred thousand. Total tied up, three hundred and fifty thousand.

Its own suppliers give it credit of one hundred and twenty thousand. Two hundred and thirty thousand euros remain to finance permanently.

The more the company grows, the more this need grows. Growth that is too fast can drain the cash of a profitable company.

The twist: some retailers have a negative need. Supermarkets get paid straight away, and pay their suppliers later.

During that delay, customers' money funds their business. Their suppliers lend to them, interest-free.

Margin, sales growth, net debt, working capital needs. Four numbers, four questions.

Does it make money? Is it selling more? Does it owe too much? And how much money does it need to keep running?

With these four answers, you know more about a company than most headlines.