c h a p t e r s i x • f u n da m e n ta l a na ly s i s : u n de r s ta n di n g e a r n i n g s & c a s h f l ow
where to find the data you need, provide tools to analyze the information and knowledge to understand its implications, in order to make solid investment decisions.
6.1 Public Information: 10-Ks, 10-Qs, 8-Ks !"#$%&'(&)'*+%*+, !!
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he first place to start analyzing a company is to go straight to the source and review the financial information that the company publishes about itself.
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In previous chapters we talked about IPOs and what it takes to be a public company in the U.S. To remain a public company in good standing with the Securities and Exchange Commission (SEC), after its IPO a company must file certain information on a quarterly and annual basis. The SEC then makes this information available to the public so that all investors have a level playing field and have access to the same information at the same time. *9CC96'(89N^:'69'Q2B'W2RTO J$58RO'9P'NR233L
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Here are the three documents most frequently filed with the SEC: For m 10 -K — This is the annual report filed by public companies, an extremely in-depth document that includes a description of the business, audited financial statements for the company’s most recent fiscal year (income statement, balance sheet, cash flow statements, and a statement of shareholder equity), executive compensation, a description of the company’s option plan, future commitments for leases, a review of any legal issues pending, and much more. An independent accounting firm confirms that the information presented is accurate by auditing the financial statements. A 10-K must be filed within 75 days of the company’s fiscal year end. FOR M 10 - Q — this is a company’s quarterly report that is filed with the SEC.
The 10-Q is less detailed than the 10-K, but it gives you a snapshot of its 83