WHAT IS 10-K
A 10-K is a comprehensive summary report of a company's performance that must be submitted annually to the Securities and Exchange Commission (SEC). Typically, the 10-K contains much more detail than the annual report, particularly what an investor would want to know prior to buying or selling shares of stock in the corporation or investing in the firm’s corporate bonds.
BREAKING DOWN 10-K
The government requires companies to furnish 10-K forms so that investors have fundamental information about companies so that they can make an informed investment decision.
The 10-K includes five distinct sections:
- Business provides an overview of the company’s main operations, including its products and services, i.e., how it makes money.
- Risk Factors outlines any and all risks that the company faces or could face in the future, typically listed in order of importance.
- Selected Financial Data details specific financial information about the company over the last five years. The idea behind this section is present more of a near-term view of the company’s recent performance
- Management’s Discussion and Analysis of Financial Condition and Results of Operations, known as MD&A, gives the company an opportunity to explain its business results from the previous fiscal year. This section is where the company can tell its story in its own words.
- Financial Statements and Supplementary Data includes the company’s audited financial statements, including the income statement, balance sheets and statement of cash flows. Also included is a letter from the company’s independent auditor certifying the scope of their review.
A 10-K filing also includes signed letters from the company’s chief executive officer and chief financial officer. In it, the executives swear under oath that the information included in the 10-K are accurate, to the best of their knowledge. These letters became a requirement after several high-profile cases involving accounting fraud following the dot-com bust.
Where to Find a 10-K
10-K filings are public information and readily available via any number of sources. In fact, the vast majority of companies include them in the Investor Relations section of their website. The information included in a 10-K can be difficult to move through, but the more familiar investors become with the layout and the type of information included, it will likely become easier to identify the most important details.