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Gathering the Key Documents for Fundamental Analysis

Part of the Fundamental Analysis For Dummies Cheat Sheet

Companies create plenty of financial documents, so you need to know which ones are most important to fundamental analysis. The following list helps you determine which documents can help you the most with fundamental analysis:

  • Earnings press release: Curious how a company’s just-completed quarter went? That’s exactly what a company must spell out in a press release it provides investors, called the earnings report. These reports are pored over by investors and the media, as they trickle out during earnings season. Key financial measures such as revenue, expenses, and profit are often first presented to investors in the earnings press release, making them a critical document for fundamental analysis.

  • Quarterly financial report (10-Q): Weeks after the earnings press release is given to investors, companies provide an official version called the quarterly report or 10-Q. In these documents, companies spell out the finalized numbers for the quarter. The 10-Q contains much of the same information as in the earnings press release, but usually to a much greater level of detail. For instance, many companies leave a statement of cash flows out of their earnings press release, but must include it in their 10-Q.

  • Annual financial report (10-K): The annual report, formally known as the 10-K, is the most important and complete document fundamental analysts receive. The 10-K spells out in detail all the relevant developments at the company and full-year financial statements. Some companies also produce a more colorful version called the annual report to shareholders.

  • Income statement: Want to know how much a company is making? Then the income statement is for you. This document shows you how much business the company is bringing in, revenue, and how much it keeps in profit after paying all its costs.

  • Balance sheet: The balance sheet is the corporate version of an individual’s net worth statement. It shows what the company owes and what it owns.

  • Statement of cash flows: There’s nothing more valuable than cold hard cash in business. A company may report huge profits on its income statement, but it is the cash that’s coming in the doors that matters most to fundamental analysts. While many investors start their fundamental analysis with the income statement and balance sheet, the statement of cash flows is critical because it is subject to fewer distortions from accounting rules.

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