A 10-K is documents required by the Securities and Exchange Commission for every publicly traded company. It contains almost every information needed by the investor who plans to buy or sell shares of stock in the corporation or investing in their corporate bonds. Thus, there are several benefits of analyzing a 10-K for investors.
These documents are publicly available and free. Therefore, anyone can access them through the companies’ websites or through the Securities and Exchange Commission.
The components of the 10-K filling
According to the rules, there are several pieces of information that every 10-K document should have. This information should be considered by investors before they decide to make an investment. The information is:
The company operation
This information should contain information about the process of a company gaining money and the markets where it currently operates. After reading that information you will understand the business.
The company risks
The document should also tell investors the risks they are currently facing. The company’s risk disclosures will help investors to now the health state of it. Whether they are facing the possibility of bankruptcy due to a pending lawsuit or they are facing tough competition.
Financial statements
The documents should also have financial statements, like income statements and balance sheets. This information tells the investors about the amount of money a company has, its debt level, and other financial data.
This is the most important information for investors since this tells them what is going on in the company’s finance.
Company’s accounting policy and practices
Within the document, the company should also disclose its warranty policies and the estimation of the warranty cost. Investors who plan to buy the company’s product, of course, do not want the company to lose too much money for the warranty of the products it sells.
Letter of the CEO and CFO Swearing under the oath
This is also important since those are the people responsible for any mistakes on the documents. By this government can prosecute the executives who falsify the 10-K form.
A letter of the company independent auditor
This will give you details of the company’s certification and financial records. You will know the auditor thought about the company, will it face an imminent demise. There will also note from the auditor like “continue as a going concern”. If you see that note, you should be careful.
