What is MD&A?

It briefs the company's way of work, its financial statements & performance.

Author: Rohan Arora
Rohan Arora
Rohan Arora
Investment Banking | Private Equity

Mr. Arora is an experienced private equity investment professional, with experience working across multiple markets. Rohan has a focus in particular on consumer and business services transactions and operational growth. Rohan has also worked at Evercore, where he also spent time in private equity advisory.

Rohan holds a BA (Hons., Scholar) in Economics and Management from Oxford University.

Reviewed By: Manu Lakshmanan
Manu Lakshmanan
Manu Lakshmanan
Management Consulting | Strategy & Operations

Prior to accepting a position as the Director of Operations Strategy at DJO Global, Manu was a management consultant with McKinsey & Company in Houston. He served clients, including presenting directly to C-level executives, in digital, strategy, M&A, and operations projects.

Manu holds a PHD in Biomedical Engineering from Duke University and a BA in Physics from Cornell University.

Last Updated:June 11, 2023

Companies are required to file quarterly or annual performance reports. These reports encompass various details, including the Management Discussion & Analysis, which is considered crucial as it provides insight into the company’s financial and operational performance.

MD&A is a section that is presented by the management (commonly known as C-level executives).

C-suite refers to managers within the organization who are the higher-ups. These are mainly the chief executive officer (CEO), chief financial officer (CFO), chief operating officer (COO), and chief information officer (CIO).

MD&A is all about comments from the management as discussed above. These comments typically cover areas such as fiscal statements, systems, and controls, compliance with laws and regulations, challenges the company is facing, and the actions taken to combat those challenges.
Management also discusses future targets & objectives and its attitude towards the newer or coming projects.

The Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB) mandate public companies to include numerous sections in the periodic report that they present to their shareholders, MD&A just being one of them.

The SEC keeps a check on public companies as to whether they comply with U.S. securities laws. This in turn helps investors as they are assured that the information they receive about the companies they invest in is acceptable.

A public company that issues stock or bonds at large is required to get itself registered under SEC. The SEC authorizes 14 items to be included in the 10-K report, with the MD&A section as Item No. 7.

The SEC delegated the responsibility for posting accounting norms for public companies in the United States to the FASB. The FASB is a private, non-profit, and regulatory organization. The FASB states the requirements for the MD&A section of the periodic filings.

Key Takeaways

  • MD&A is a starting point for analysts, investors, and even beginners who start to understand the financial performance of the company.
  • MD&A is a mandatory requirement for public companies.
  • There is no such rule as to how to present it, but one must include all the points to make it look informative.
  • Management Discussion & Analysis provides a brief idea about a company's financial & operational performance and management’s way of work.

Why is Management Discussion & Analysis important?

The MD&A is an important declaration needed to be there in periodic reports. It briefs the company's way of work, its financial statements & performance. It also states the management’s view about the performance of the company.

It is helpful and can be used as a tool even for beginners who need to understand a company's performance. It is not written in a complicated way. Rather, it is written in a way that the users can understand and digest.

Talking about the analysts and investors, it serves as a start since it briefs about the overall financial and operational performance of the company. The details provided in it are figures and facts relating to the preceding and current year and also any other future perceptions.

MD&A gives an understanding of how the company functions under both macro and micro economic factors. It also helps users to understand the mindset of the management and why certain steps are taken in certain ways.

Apart from this, it also helps users in calculating various financial ratios, which helps in a better understanding of the financial statements.

The Management Discussion and Analysis section discusses in detail the way the company has taken to get near to its vision. It shows the prudent aim of the management and the hardships it went through to achieve its long-term objectives & targets.

It mainly shows the financial success of the company throughout the reporting period. It talks about the present financial position of the company in detail. This section also shows how the company has made progress in its operations and HR department. 

MD&A summarizes the position in the past, the position in the current environment & future protrusions as well.

An investor can get an overview of the strengths and weaknesses of numerous companies by simply comparing their Management Discussion and Analysis reports. 

This makes the work effortless since the information collected assists him to choose the best of the lot for investment purposes. 

These periodic reports show an investor not only a long-term view of the current business but also the potential and the business’s future. It provides one with a long-term investment portfolio rather than just profits.

Content of Management Discussion & Analysis

There is no law or rule as such for the content of MD&A. Different companies use different content, but some of the information needs to be put in it. Here are some of the facts that needed to be stated for an MD&A to look informative.

1. Administrative Overview and Outlook

While the administrative overview is not a mandate, most companies choose to include it. In the overview, management discusses the company’s fiscal targets, its strengths and weaknesses, its pitfalls and challenges, and its openings for growth.

2. Operating Results

Management generally presents the financial results for the year-end, recapitulating and interpreting the figures from the report, but they may also present quarterly reports.

They may also talk about any sort of precariousness that might affect future success, predicted results, and economic drivers.

They also include supplemental fiscal information that would be insightful to the reader. Apart from this, the companies are expected to declare any trends or pitfalls that may impact revenue (both positive and negative impact).


While discussing the results of operations, the management must concentrate on unusual events or deals and any major economic changes that affect income from operations.

In case the company experienced a major rise in sales in comparison to former periods, the management must discuss the degree to which the increase is attributable to different factors like a price increase, the launch of a new product or service, etc.

3. Liquidity and Capital Resources

The management should discuss any sort of significant events that might have changed the liquidity and capital resources.

They should also give insights on any current or implicit future capital expenditure commitments and the financing options available to meet the CAPEX commitments.

The management must recognize any known trends, events, commitments, demands, or uncertainties that are likely to result in significant changes in liquidity or capital resources.

Illustration: The management should discuss the current capital structure and any plans to offer fresh bonds or stocks.

4. Off-Balance Sheet Arrangements

Off-balance sheet arrangements are deals or agreements that are not mandatory to be reported on the balance sheet though this can affect revenues, expenses, and cash flows. 


Management can share how these arrangements serve the business and how they will affect credit risk.

5. Important accounting policies and estimates

The SEC urges companies to give granular information regarding their accounting policies in the MD&A section of the periodic report.

It helps investors and other stakeholders to know about the impacts of the accounting policies and the decisions taken. It also talks about the possible changes that might happen if the company would have taken other assumptions.

6. Business Status

It should give details about the industry & cut-throat structure, and crucial growth in current times concerning the company’s business.

It should also discuss the impact and changes in the regulatory environment due to new laws that are expected to be introduced in the future.

7. SWOT Analysis

It should talk about its strengths, weaknesses, opportunities, and imminent threats. It should discuss the pitfalls that can affect the company in the future and the plans the management has in mind to cross those pitfalls. 


The report should also give details about any major change in the company’s economic environment that would affect its income from operations. It should also state the responsive action that the management plans to come out of the situation.

8. Internal Checks and Control

It should provide an overview of the internal checks and controls that the company has put in place to prevent threats. It should also tell how successfully the company has been taking care of internal errors, thefts, frauds, and other such threats.

The link to the MD&A report of a public company named MACO is inserted to understand it better.

Tips for drafting an effective MD&A

Management Discussion & Analysis of different companies may look distinct. This is because there is no prescribed format for the same, and SEC allows the changed reports provided that they should contain the important elements.

You can consider the following things while drafting and make sure it is adequate & productive.

1. Layered Disclosure

MD&A should be drafted in a way that the extra critical subject matters are placed at the top following less critical subject matters. This is also called the layering of matters from most important to least important.

The layered disclosure has been recommended by the SEC staff to increase the clarity of MD&A. This has been followed by the SEC staff in MD&A's illustrative release in 2003.

Some of the companies follow layered disclosure where MD&A starts with an executive summary; such layered disclosure will be facilitated by the inclusion of an executive summary.

2. Readability Techniques

To improve the legibility of MD&A, one should use heads & sub-heads, bold, italic font, bullet points, and an easy understanding.

One can use hyperlinking instead of repeating things while writing other parts or disclosures (in the case of Form 10-Q MD&A or the case of Form 10-K disclosures). This makes it crisp and clear and makes it sound non-repetitive.

3. Item 303- Mandates to Produce Material Trends

Item 303 lays down the SEC disclosure requirements applicable to MD&A. According to this, very basic disclosure is to be given. A detailed analysis of significant trends and other significant events that may affect the revenue & profit from operations, capital resources, etc.


There is a dispute about putting progressive statements in MD&A. Some entities prefer it, while some don’t.

Some may say it is better to include progressive statements or any such disclosure since failure to disclose known things can have a bad impact, like Rule 10b-5 allegations from private parties and SEC civil actions.

4. Disclosure of Trends and their influence on Future Periodic Reports

One should be aware of the fact that the disclosures need to be updated periodically. You cannot delete the already given disclosure just for the fact that things changed.

You have to update about things and the changes in the disclosure periodically. The companies need to continue to update the changes every year rather than just omitting the disclosure itself.

5. Location of Trends Disclosure

The safe harbor for progressive/forward-looking statements, as given by the Private Securities Litigation Reform Act (PSLRA) applies to MD&A disclosure and not the footnotes given in the financials. 


It should be kept in mind the fact that PSLRA applies to MD&A only if one wants to share the trend insight in the financial statements also.

6. Cross-Referencing MD&A & Risk Factors Disclosure

While drafting Management Discussion & Analysis disclosures, one should keep a check that everything related to the particular disclosure is mentioned or updated.

For example, while drafting Form 10-K or Form Disclosure counsel should consider whether any disclosure 10-Q, should keep a check on risk factors and update the same.

7. Quantification of Factors Impacting Performance

MD&A requires disclosure of the factors that affect the revenue and profit from operations.

While disclosing this, one should understand whether the impact is magnanimous and whether quantifying the effect will give a crystal clear picture of the company’s performance. 


It should be checked and quantify the impact that the performance drivers had on the performance of the company during the period for which it is being drafted.

8. Non-GAAP Financial Measures

The non-GAAP financial measures in periodic reports are different from that of earnings release disclosures.

The disclosure of the reports is less substantial than that of the release. This is because companies have a point of view that investors and analysts focus more on releases than on reports, so it is not necessary, and it may sound monotonous.

While drafting MD&A, one should keep in mind and evaluate the SEC rules and Staff guidance regarding non-GAAP financial disclosures and make sure that it complies with legal & regulatory requirements.

9. Review the Earnings Release Disclosure Package for Consistency

While drafting MD&A, one should analyze & evaluate the earnings release, earnings call transcript, and earnings deck investor presentation to check whether these are following the periodic report.

This is because the SEC Staff will check all four, including earnings releases, earnings call transcripts, earnings deck investor presentations, and periodic reports.


If they find any conflicting disclosures which are also significant then it will be part of the Sec comment.

10. Post-Period Events

Companies should disclose events occurring after the period for which the report is drafted even if those events do not have a significant impact on the current period. This should be done even though those events are already mentioned in the financial footnote.

11. Review Peer Company Disclosure

One can review Management Discussion & Analysis of similar companies. This helps to keep a check on the clarity of and see that nothing important is missed out. One should check the SEC comment letters received by similar companies.

This helps to keep the focus on the areas checked in detail by the SEC since those areas might be of significant importance to the company itself.

12. Critical Accounting Policies and Estimates

Companies should also discuss the accounting principles and policies they follow. It is not necessary to disclose all the policies, three to four will suffice.

Apart from discussing the policies, they should also discuss the impact those policies have on the company and how significant the impact is. This has to be included despite being already included in the financials of the company.

Researched and authored by Shambhavi Himatsingka |  LinkedIn

Reviewed and Edited by Raghav Dharmarajan | LinkedIn

Free Resources

To continue learning and advancing your career, check out these additional helpful WSO resources: