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Financial Reports: How to Fill Out the 10-K

Form 10-K is the official annual report form the SEC requires, and it's the report you're most likely to see as part of the glossy annual report that companies send out to investors. The 10-K includes four parts.

Business operations

In Part I of the 10-K, you find the following details about business operations:

  • Item 1 — Business: This section describes the company's operations with discussions about product lines, major classes of customers, industries in which the company operates, and details about domestic and foreign operations. “Risk factors” (Item 1A) and “Unresolved staff comments” (Item 1B) are also discussed in this section.

  • Item 2 — Properties: This section describes the property the company owns.

  • Item 3 — Legal proceedings: This section discusses any legal proceedings the company is involved in and the material impact the lawsuits may have on the company.

  • Item 4 — Mine safety disclosures: If applicable, information must be provided regarding mine safety violations or other regulatory matters.

Financial data

Part II of the 10-K includes information related to any matters that impact the company's financial health. In this part, you find the following items:

  • Item 5 — Market for registrant's common equity, related shareholder matters, and issuer purchases of equity securities: In this section, you find information about the company's stock market, which stock exchange the company is traded on, the quarterly stock prices for two years, the number of shareholders, the amount paid in cash dividends for two years, and discussion of any restrictions on the company's ability to pay future dividends.

  • Item 6 — Selected financial data: In this section, you find a five-year summary of selected financial data, including net sales, income or loss from continuing operations (company activities that go on each year to make and sell products or services) on a per-share basis, total assets, long-term debt, cash dividends per share of common stock, and information about any redeemable preferred stock (stock that can be converted to debt).

  • Item 7 — Management's discussion and analysis of financial condition and results of operations: In this section, management discusses the company's financial condition and any changes to its condition that have occurred in the past year. Management also discusses the results of operations and analyzes the company's liquidity, resources, and operations. If any major changes in the financial statements took place during the year, the company also discusses those changes.

  • Item 7A — Quantitative and qualitative disclosures about market risk: This section is where you find management's discussion of external economic factors that impacted the company's operations, such as the effects of inflation. You also find discussion about the company's competition and any major risks to the industry as a whole.

  • Item 8 — Financial statements and supplementary data: Here's where you find the balance sheet, income statement, and statement of cash flows, as well as all supplementary information for these documents, such as the notes to the financial statements and the auditors’ report.

  • Item 9 — Changes in and disagreements with accountants on accounting and financial disclosure: If the company has any disagreements with the auditors about what information must be presented on the financial statements and how to present it, this section is where you find discussion of the differences.

  • Item 9A — Controls and procedures: Here you find information about the company's internal controls and procedures to avoid fraud and ensure accuracy in the financial statements.

  • Item 9B – Other information: This section includes any items that aren't reported on an 8-K during the year, as well as items that are reported on an 8-K but aren't reported elsewhere in the 10-K.

Information about directors and executives

Part III of the 10-K takes you behind the scenes of company operations and gives you information about the directors and top executives, including any special compensation packages they receive. Following are the items you can expect to find:

  • Item 10 — Directors and executive officers of the registrant: Here's where you find out who sits on the company's board of directors, as well as who serves as the company's top executive officers.

  • Item 11 — Executive compensation: The company must report the compensation packages for all its top executives in this section.

  • Item 12 — Security ownership of certain beneficial owners and management and related stockholder matters: Here you find details about the stock owned by top executives, board members, senior managers, and any other major shareholders of the company.

  • Item 13 — Certain relationships and related transactions and director independence: This section is where you find out about large related-party transactions, such as any transactions between the company and its top management team. Companies must also include information about significant transactions with subsidiaries or major shareholders.

  • Item 14 — Principal accounting fees and services: Here's where you find details about the relationship between the company and its accountants. The company must report the fees billed for each of the past two fiscal years for professional services by the principal accountant for the audit of the company's financial statements, as well as for any services related to the audit.

    The company must also disclose fees for tax services by professional accountants for tax compliance, tax advice, and tax planning, as well as fees for any additional services that the principal accountant provides. In addition, the company must disclose the audit committee's preapproved policies and procedures related to the work of the principal accountant.

The extras

Part IV of the 10-K is the catchall for additional exhibits, including any financial statement schedules and any reports the company filed throughout the year and reported on Form 8-K.

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