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What is MD&A?

Management Discussion and Analysis in the 10-K

What is the MD&A section of financial reporting?

The Management Discussions and Analysis (MD&A) is a section of the annual report or SEC filing 10-K, and it provides an overview of how the company performed in the prior periods, the current financial condition, and the future projections. It helps potential investors understand the company’s financial fundamentals and the management performance. MD&A is a required disclosure for publicly traded companies that fall under the jurisdiction of the U.S. Securities and Exchange Commission.

Typically, the MD&A, as part of form 10-K, attempts to give a balanced view of the company through the eyes of the company’s management team. The section covers several topics of interest.

MD&A example



Liquidity and Capital Resources

The management must identify any known trends, events, commitment, demands or uncertainties that are likely to result in material changes in liquidity or capital resources. The section should also discuss the company’s material commitments for capital expenditures and any anticipated sources of funds to meet such commitments. For example, the management should explain the current capital structure and any plans to offer additional bonds or stocks.


Results of Operations

When discussing the results of operations, the management must focus on unusual events or transactions and any significant economic changes that have affected income from continuing operations. They must explain any known trends or uncertainties that have had or expect to have a favorable or unfavorable impact on the net revenues from operations. In case the company has experienced a rise in sales or revenues compared to previous periods, they must explain the degree to which the increase is attributable to a price increase or introduction of a new product or services.


Critical Accounting Estimates

The SEC encourages companies to give a full explanation of their accounting policies in the MD&A. This helps the investors to understand the effects of the accounting policies, the judgment made when applying the policies and the likelihood of a material difference in the reported results if the company applied different assumptions. For example, a company may explain their adherence to FIFO or LIFO. In the past, SEC staff have acknowledged that the quality of disclosure of critical accounting policies by public companies has been unsatisfactory. Therefore, public companies should make full disclosures of their critical accounting policies in the MD&A to help investors understand the company’s performance.


Additional resources

  • Balance Sheet
  • Income Statement
  • Types of SEC Filings
  • Investment Methods

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