Understanding the 10-K

If you can’t find 10-K, and you often can’t, there is another search box at the top. Type in 10-K and enter.
You now get a reduced list, most of which are 10-K’s. Select the one at the top, which is the most recent, and double click that You then get the standard SEC title page with the name of the company.

Scroll down to the index page, which is the next page or two. You will immediately see that the SEC report is massive. Most of that stuff is of limited use to you, unless you are:

  1. An expert in company law.
  2. You know what you are looking for.
  3. You have invested in the company and suspect the company directors of malfeasance, or you think something strange is going on.

The “risks” pages are always interesting, and are good for a laugh if nothing else. No, to be serious, the company is covering itself for EVERYTHING, and can claim “YOU HAVE BEEN INFORMED AND WARNED”.

An alternative search method to going directly to the SEC web site is to Google the company name and 10-K. This often takes you directly there.

Go down the SEC report index, and down near the end you get to the end sections, Down, down, past all the list of options directors have awarded themselves, and the antics they get trading is just the start of it!

The Financial Statement is quite brief, and is in turn divided in three sections

  1. Revenue (The Income Statement).
  2. The Balance Sheet.
  3. The Cash Flow Statement.

The financial statements are usually highlighted in blue in the 10-K fo but are not otherwise very long. You get a few figures from each of the Cash Flow Statement, Revenue Statement and the Balance Sheet, as will be in the next chapter. The alternative method (especially if the company is not quoted in the US) is to access Annual Reports from the company web site. (There are special SEC report forms for foreign companies quoted in the US, the 20-K and the 20-F. It is still more worthwhile to look at these than the foreign company Annual Reports, which can be quite peculiar).

Publicly quoted companies must publish their own Annual Reports each year, which they usually publish on their company web site. This is very much a public relations exercise, and sometimes the actual financial statements are well hidden. Indeed some offending companies fail to publish important figures in their financial statements. They give summaries which hide expenses in “Total Expenses” and so on. If this happens look in the SEC report, which requires obligatory figures; or from my wide experience, I suggest giving these companies a wide berth.There is plenty more fish in the sea.

Do not invest firms with incomplete financials.