1.1.1. Annual Reports: Form 10-K
Every publicly traded company must file an annual report with the SEC on Form 10-K. This is the most detailed mandatory filing, and is the primary go-to document for information about a company’s finances and operations. The 10-K is where you can find the financial statements discussed later in this chapter, typically going back five years. The financial statements contained in the 10-K must be audited by an accounting firm that is independent from the company itself. A copy of the 10-K must be signed and certified by both the company’s chief executive officer (CEO) and its chief financial officer (CFO).
The 10-K includes detailed information about the company’s business, including its operations, products and services offered, major markets, and primary competitors. It discloses the largest shareholders—shareholders that own more than 5% of the company—and also lists the company’s outstanding shares and provides information about options and warrants.
The 10-K must also include an internal control report, which must (1) state management’s responsibility “for establishing and maintaining an adequate internal control structure and procedures for financial reporting” and (2) contain an assessment of the effectiveness of the internal control structure and procedures. An outside accounting firm must act as auditor for the internal control report and attest to its accuracy.
The 10-K also includes a section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” usually abbreviated as MD&A. The MD&A is a narrative statement from the company giving management’s view of the company’s financial s