Sophisticated investors know their way around the 10-K report. It is a document released annually by companies to shareholders. Furthermore, the format is typically uniform, as it is a required submission. Next, we discuss the highlights and how to navigate such a large and comprehensive report.
What Is The 10-K
The deadline for submission of this report is 60 days after the end of the fiscal year. Additionally, companies with $10 million in assets and over 2000 owners in a class of equity securities meet the requirements to file such a report. Furthermore, every annual report contains 4 parts and 15 schedules.
Next, Part 1 details business activities , specifically what the company does and who it owns. This part contains issues relating to competition, regulations and labor issues. Furthermore, this section describes risks to the business and any outstanding legal proceedings.
Part 2 further details the current business environment. This section measures stock performance over the given time period. Additionally, it gives details related to stockholder issues such as purchase of securities. Also, investors find consolidated financial statements in this section.
Part 3 talks about the C-level management. This includes the directors, officers, and corporate governance. Additionally, this section is home to executive compensation plans.
Lastly, Part 4 contains exhibits and financial statements. This is a wrap up and explanation for the rest of the document.
Why Is The 10-K Important?
This document is a tell-all for the business environment in which the company operates. Though these reports are often dry, the information is sound. This annual report details exactly in what space the company operates, and what risks it anticipates moving forward. This is especially important because things may look calm on the surface, but a big lawsuit could spell trouble in the future for any business.
Finally, despite being a required document, the 10-K is also extremely helpful in making investment decisions. Investors find relevant information regarding risks and general health of the business environment here. Next steps for investors include listening to conference calls or investor meetings. This ensures that investors understand what they read in the 10-K.