How to Read a Form 10-K

Unique to the 10-K, the financials are legally required to be audited by an independent accountant. But of course, the footnotes and non-highlighted sections of the 10-K can contain useful information on the company. The 10-K filings of companies in the U.S. can be retrieved from the SEC EDGAR database, as shown below. On the first page, the number of shares outstanding is listed as of the published date of the report. Investors will notice that this share count differs from the numbers used to calculate the earnings per share on the statement of earnings. The number of shares outstanding used in the statement of earnings is the average shares outstanding during the period, not the ending value.

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These disclosures may occur periodically or as specific events occur. This section provides typically static information that is useful for any investor who requires a general understanding of the industry and company. It has various sections including business, risk factors and legal proceedings. Investors should review this section, even if they are familiar with the company or business, paying special attention to any changes in the language, particularly those related to risk factors and legal proceedings. Two of the most important of these documents are the annual report and the Form 10-K. Similar in many ways, both are designed to help inform current shareholders or potential investors—along with research analysts, money managers, and other financial professionals—about the company’s performance.

What is the Difference Between 10-K and Annual Report?

In addition, business segment information is disclosed and discussed in this section. Often companies with either multinational operations or multi-segment businesses separate the operational results from the consolidated liabilities meaning in accounting results so investors can analyze the growth drivers for the company. Part II focuses on the company’s financial results of the operations. This includes the very important management discussion and analysis (MD&A).

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The most money a company owes, the more it may have difficulty paying all of its creditors. For an investor looking to buy stocks, pay attention to historic financial trends. If the company seems stagnant, or even contracting, it may not be poised for significant growth in its stock price. Part I of this form will include information on the company’s core business model, with a statement of the company’s chief revenue streams. In a nutshell, this section of the report tells you how the company makes its money and how it anticipates doing so going forward. Form 10-K can be found along with other SEC required forms and investor information on company websites, generally within an “investors” or “investor relations” section.

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  1. Updated accounting standards now require that companies disclose lease liabilities.
  2. Together, they allow you to see what is going on with a company’s finances.
  3. Yes, you can start an LLC online in almost every state and Washington D.C. The only state that does not yet offer online filing for LLC formation is Maine.

This section gives the people running the company the ability to tell their own story about what happened over the last year. Toward the end of Part I, a company will include a section detailing its current legal proceedings. This information allows investors to make informed decisions about whether to trade or own stock in the company. The documents are free and can be downloaded online from a company’s website and public databases such as the SEC’s EDGAR. In addition to the information that you’re required to put in a 10-K, you must also include any other material information that clarifies the required information and ensures that no parts of the report are misleading. In 2018, Beyond Air, a NASDAQ-traded medical device biopharmaceutical company, approved a change to the end of the fiscal year, moving it from December 31 to March 31.

Do you own a business?

Suddenly, the company makes national headline news, because thousands of models are breaking down beyond repair. In the Form 10-K filing, a company must disclose its warranty policies and estimated warranty costs for products it sells or manufactures. If revenues decline, and you stop sending checks to the landlord, the mall owner can kick you out of your storefront and force your company into bankruptcy due to the missed lease payment.

Forward-looking statement is the disclaimer that projections as to future performance are not guaranteed, and things could go otherwise. Here, the company discloses any significant pending lawsuit or other legal proceeding. References to these proceedings could also be disclosed in the Risks section or other parts of the report. The Global Annual to Decadal Climate Update is issued annually by the World Meteorological Organization (WMO). It provides a synthesis of the global annual to decadal predictions produced by the WMO-designated Global Producing Centres and other contributing centres. In 2010, Burger King approved a change to the end of the fiscal year, moving it from June 30 to December 31.

As mentioned earlier, GAAP accounting is not followed by all companies. Existing regulations also require companies to publish their bylaws, list subsidiaries, and include copies of their material contracts in this section. This means that companies can choose to report line items that may not be recognized under GAAP. An example of a non-GAAP measure that is commonly reported by companies is EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization).

The transition period of July 1, 2010, through December 31, 2010, was covered on the form 10-KT. A 10-Q must be filed for each of the first three quarters of the company’s fiscal year. Yes, you can start an LLC online in almost every state and Washington D.C. The only state that does not yet offer online filing for LLC formation is Maine. Unlike a sole proprietorship, an LLC is a separate entity from the business’s owner. Most sole proprietors would benefit from converting their sole proprietorships to LLCs because LLCs offer liability protection and are inexpensive to start and maintain. How you pay yourself as an owner will also affect your federal taxes.

It is a professionally bound but flexible publication, often resembling a printed magazine. It is intended for—and distributed to—shareholders, but is also freely given to anyone interested in the company. However, not everything is going to be relevant to individual investors.

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