Form 10-K is a detailed annual reportSEC FilingsSEC filings are financial statements, periodic reports, and other formal documents that public companies, broker-dealers, and insiders are required to submit to the U.S. Securities and Exchange Commission (SEC). The SEC was created in the 1930s with an aim to curb stock manipulation and fraud that is required to be submitted to the U.S. Securities and Exchange Commission (SEC). The filing provides a comprehensive summary of a company’s performance for the year. It is more detailed than the annual report that is sent to shareholders during the annual meeting to elect directors. SEC filing 10-K outlines the company’s history, equity, subsidiariesSubsidiaryA subsidiary (sub) is a business entity or corporation that is fully owned or partially controlled by another company, termed as the parent, or holding, company. Ownership is determined by the percentage of shares held by the parent company, and that ownership stake must be at least 51%., organizational structure, audited financial statements, and other relevant information.
Source: SEC
The 10-K is organized in a way that makes it easy to consistently find the same information across multiple companies in the same place on a 10-K. Here are the main sections of the form:
Part I
Part I of Form 10-K provides an overview of the company’s business and the risk factors that investors should know when investingInvestment MethodsThis guide and overview of investment methods outlines they main ways investors try to make money and manage risk in capital markets. An investment is any asset or instrument purchased with the intention of selling it for a price higher than the purchase price at some future point in time (capital gains), or with the hope that the asset will directly bring in income (such as rental income or dividends). in the company. In this section, the company should disclose any material legal proceedings that the firm is part of or to which any of the company’s property is subject. Also, this section should disclose any unresolved comments from SEC staff about the company’s report(s) in prior periods. If applicable, the company should provide information concerning mine safety violations or other regulatory issues.
Part II
Part II of provides a comparative presentation of financial data for the five immediately prior years, making it easy for investors to measure the company’s latest performance against past data. This section also includes the audited financial statements that have been reviewed by a registered CPA firm.CPA vs CFA®When considering a career in corporate finance or the capital markets you will often hear people asking, “Should I get a CPA or CFA?” and “Which is better?”. In this article, we will outline the similarities and differences of the CPA vs CFA designations and try to steer you in the right direction about These financial statements comprise the independent auditor’s report, a consolidated balance sheetBalance SheetThe balance sheet is one of the three fundamental financial statements. The financial statements are key to both financial modeling and accounting., a consolidated statement of operations,Income StatementThe Income Statement is one of a company's core financial statements that shows their profit and loss over a period of time. The profit or and other accounting reports and notes. The management discussion and analysisWhat is MD&A?The Management Discussions and Analysis (MD&A) is a section of the annual report or SEC filing 10-K that provides an overview of how the company performed in the prior period, its current financial condition, and management's future projections. of the company’s performance provides a clear overview of the financial and operational issues that influenced the operational results.
Part III
This section of the 10-k includes material disclosures relating to directors, executive officers, executive compensation, and corporate governance. Firms should also reveal the beneficial ownership of managementInvestor InfluenceThe level of investor influence a company holds in an investment transaction determines the method of accounting for said private investment. The accounting for the investment varies with the level of control the investor possesses. and significant shareholders, certain relationships and related transactions, director’s independence, and accountant fees and services.
Part IV
Companies should list the financial statements, schedules, and exhibits that are filed in Part II. The exhibits include all material contracts, the company’s organizational documents, a list of significant subsidiaries, and applicable certifications. Also, this is where the management – CEO, CFO, and members of the board of directors – append their signatures, certifying that SEC 10-K filing is accurate.
Relevance for a financial analyst
Financial analysts routinely have to pull information when performing financial analysis and financial modelingWhat is Financial ModelingFinancial modeling is performed in Excel to forecast a company's financial performance. Overview of what is financial modeling, how & why to build a model.. In order to make an assessment about the attractiveness of an investment, an analyst needs to look at the historical financial information of a company, which is where the 10-K and 10-Q (quarterly reports) are extremely important.
Thank you for reading CFI’s explanation of a 10-k filing. To further advance your financial knowledge, see the following free CFI resources:
Balance SheetBalance SheetThe balance sheet is one of the three fundamental financial statements. The financial statements are key to both financial modeling and accounting.
Income StatementIncome StatementThe Income Statement is one of a company's core financial statements that shows their profit and loss over a period of time. The profit or
Types of SEC FilingsTypes of SEC FilingsThe US SEC makes it mandatory for publicly traded companies to submit different types of SEC filings, forms include 10-K, 10-Q, S-1, S-4, see examples. If you are a serious investor or finance professional, knowing and being able to interpret the various types of SEC filings will help you in making informed investment decisions.
Investment MethodsInvestment MethodsThis guide and overview of investment methods outlines they main ways investors try to make money and manage risk in capital markets. An investment is any asset or instrument purchased with the intention of selling it for a price higher than the purchase price at some future point in time (capital gains), or with the hope that the asset will directly bring in income (such as rental income or dividends).
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