Understanding 10-Ks
Due to the depth and nature of the information they contain, 10-Ks are quite long and usually complex. But investors need to understand that this is one of the most complete and important documents a public company can publish each year. The more information they can gather from 10-K, the more they can understand about the company.
The government requires companies to issue 10-K forms so that investors have fundamental information about companies so that they can make informed investment decisions. This form gives a clearer idea of everything the company does and what types of risks it faces.
Investors who know know that 10-K can also be obtained using the company's search function through the EDGAR SEC database.
10-K includes five separate sections:
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Business. This provides an overview of the company's core operations, including its products and services (ie method of earnings).
Risk factors. They set out all the risks that the company faces or may face in the future. Risks are usually listed in order of importance.
Selected financial data. This section describes specific financial information about the company for the past five years. This section provides a brief overview of the company's recent performance.
Discussion and analysis by management of the financial condition and results of activities. Also known as MD&A, this gives the company the opportunity to explain its business results for the previous fiscal year. In this section, the company can tell its story in its own words.
Financial statements and additional data. These include the audited financial statements of the company, including the income statement, balance sheets and cash flow statement. This section also contains a letter from the company's independent auditor certifying the scope of their audit.
Declaration 10-K also includes signed letters from the CEO and CFO of the company. In it, executives swear under oath that the information included in 10-K is accurate. These letters became a requirement after several high-profile cases involving post-defeat accounting fraud.
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Where to find 10-K
It should be noted that 10-K applications are publicly available information and are readily available from a number of sources. In fact, the vast majority of companies include them in the "Investor Relations" section of their website. The information included in 10-K can…
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