What Is a 10-K?
Main Points
A 10-K is a detailed report on a company's financial performance that is required to be submitted yearly by publicly traded corporations.
This study is much more in-depth than the annual report since it is required by the Securities and Exchange Commission (SEC) of the United States.
The 10-K contains information about the company's history, its financial statements, profits per share, and other pertinent data.
The Form 10-K is a valuable resource that may assist investors in making key investment choices.
What Is a 10-K?
A publicly listed business in the United States is obliged to submit annually what is known as a "10-K," which is an extensive report regarding the firm's financial performance. This report is required by the United States Securities and Exchange Commission (SEC). Compared to a firm's annual report, which is often sent to shareholders in advance of the annual meeting at which chief executives are chosen, this report provides much more granular information. [1]
A corporation is expected to publish a variety of information in its 10-K, including its history, organization structures, income reports, profits per share, subsidiaries, executive remuneration, and other pertinent data.
The Securities and Exchange Commission (SEC) requires the submission of this report to ensure that investors are kept informed about the current state of a company's finances and to provide them with the opportunity to acquire sufficient knowledge before buying or selling shares in the company or investing in the company's corporate bonds. [2]
Understanding 10-Ks
The complexity and breadth of the information included in the 10-K make for a document that is often rather lengthy and difficult to understand. On the other hand, investors need to be conscious that this is one of the papers that a public business must release each year that is both the most thorough and the most essential. They will have a deeper comprehension of the firm if they can extract as much information as possible from the 10-K.
The government mandates that businesses post 10-K forms so that investors have access to key information about firms and may make educated choices on their financial investments. This form provides a more accurate picture of a firm's performance and the many risks it confronts.
The 10-K consists of five separate components, which are as follows:
Business. This is a summary of the firm's primary business activities, including the goods and services it offers (i.e., how it makes a profit).
Risk factors. These describe the potential risks the firm is exposed to and may be in the future. In most situations, the risks are ranked according to their significance level.
Selected financial data. In the next section, particularly financial data on the firm for the last five years is provided in depth. This section focuses primarily on the firm's current performance and puts it in a near-term perspective.
Discussion and analysis of the company's financial status and results of operations provided by management. This allows the corporation to discuss its business outcomes from the previous financial year and is hence also referred to as Management Discussion and Analysis ( MD&A). In this part, the firm may explain its story as it sees fit using its own words.
Financial statements and supplementary data. Financial statements consist of financial statements, balance sheets, and statements of cash flows, all of which have been audited by an independent accounting firm. This part also contains a letter from the firm's independent auditor validating the extent of the examination performed on the company. [3]
The CEO and CFO of a corporation both need to sign off on a letter that is included in the 10-K. The document contains the executives' sworn statements, affirming under oath that the data included in the 10-K is truthful. After many high-profile instances involving fraudulent activity followed by the dot-com crash, the necessity to send these letters became standard practice. [4]
10-K Filing Deadlines
The 10-K has several due dates depending on the size of the firm that is filing it. Companies that have issued shares to the general public and made them available for trading and have a public float of $700 million or more are required by the SEC to submit their 10-K report within the first 60 days following the close of their fiscal year. Companies with a float of $75 million to $700 million have 75 days after the close of the fiscal year to publish their 10-K, and companies with a float smaller than $75 million have 90 days. [1]
Where to Find a 10-K
It is important to note that 10-K filings are considered public information and may easily be obtained from various sources. They may be found on the websites of most firms, namely in the Investor Relations sections. The information contained in a 10-K can be tough to navigate. However, the more acquainted investors grow with the structure and the information provided, the more probable it is that it will become simpler to find the significant elements.
[1] https://www.investor.gov/introduction-investing/investing-basics/glossary/form-10-k
[2]https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins/how-read
[3]https://www.investor.gov/introduction-investing/getting-started/researching-investments/how-read-10-k
[4] https://www.sec.gov/news/testimony/090903tswhd.htm