How to read 10-Ks
I'll teach it to you in 2 minutes:
I'll teach it to you in 2 minutes:
If you want to make good investment decisions, you need to understand the company you invest in.
An annual report (10K) tells you everything you need to know.
An annual report (10K) tells you everything you need to know.
A 10K consists of 4 parts:
1. Business
2. Risk factors
3. Management discussions and analysis
4. Financial statements
1. Business
2. Risk factors
3. Management discussions and analysis
4. Financial statements
1. Business
This section describes the companyβs main products and services.
It's a good place to start as it tells you how a company makes money.
This section describes the companyβs main products and services.
It's a good place to start as it tells you how a company makes money.
2. Risk factors
This section shows the risks a company faces, usually listed in order of importance.
As Benjamin Graham once said: βThe essence of investment management is the management of risks, not the management of returns."
This section shows the risks a company faces, usually listed in order of importance.
As Benjamin Graham once said: βThe essence of investment management is the management of risks, not the management of returns."
3. Management discussions and analysis (MD&A)
Management's view on the business results of the past fiscal year.
This allows management to tell its story in its own words.
Management's view on the business results of the past fiscal year.
This allows management to tell its story in its own words.
4. Financial statements
There are 3 financial statements in a 10K:
- Balance Sheet
- Income Statement
- Cash Flow Statement
There are 3 financial statements in a 10K:
- Balance Sheet
- Income Statement
- Cash Flow Statement
Balance sheet:
The balance sheet gives you an overview of a company's main assets and liabilities.
You want to invest in companies which don't have too much debt.
The balance sheet gives you an overview of a company's main assets and liabilities.
You want to invest in companies which don't have too much debt.
Income statement:
An income statement is also called a profit and loss account.
It shows the company's revenues and expenses over a certain period.
An income statement is also called a profit and loss account.
It shows the company's revenues and expenses over a certain period.
Cash Flow Statement:
The cash flow statement shows how much cash goes in and out a company over a certain period.
You want to invest in companies that make money and manage their cash position well.
The cash flow statement shows how much cash goes in and out a company over a certain period.
You want to invest in companies that make money and manage their cash position well.
Not convinced yet about the importance of a 10K?
Here's Jim Rogers about the best advice he ever got:
Here's Jim Rogers about the best advice he ever got:
The word is out!
I left my job to transform Compounding Quality into a full investment platform.
To celebrate, I am sharing a free Financial Analysis course.
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I left my job to transform Compounding Quality into a full investment platform.
To celebrate, I am sharing a free Financial Analysis course.
Sign up here if you want to receive it for free: eepurl.com
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