Management discussion and analysis (MD&A)

Definition

Management Discussion and Analysis (MD&A) is a section of a company's annual report where management provides an overview of the financial activities and performance. It offers insights into the company's operations, financial condition, and future prospects from the perspective of management.

5 Must Know Facts For Your Next Test

1. MD&A helps investors understand the financial statements by providing context and explanations for the numbers.
2. It includes discussions on liquidity, capital resources, results of operations, off-balance sheet arrangements, and risks.
3. The Securities and Exchange Commission (SEC) requires publicly traded companies to include MD&A in their annual reports.
4. MD&A often contains forward-looking statements that predict future outcomes based on current information.
5. Management uses MD&A to highlight significant trends and uncertainties that could impact financial performance.

Review Questions

• What are the primary components discussed in an MD&A section?
• Why is MD&A important for investors?
• Which regulatory body mandates the inclusion of MD&A in annual reports?

Related terms

Annual Report: A comprehensive report detailing a company's activities and financial performance throughout the preceding year.

Financial Statements:

Formal records of the financial activities and position of a business, person, or other entity.

Liquidity:

A measure of how quickly an asset can be converted into cash without affecting its market price.