How to read a 10-K without getting lost
A practical order for reading a company’s annual report: which sections matter, what to skip, and the questions to ask.
What a 10-K is
A 10-K is the annual report every US-listed company files with the Securities and Exchange Commission. It is audited, it follows a fixed layout, and it is written under legal liability, which makes it the most reliable single document about a company.
The quarterly version is the 10-Q (unaudited, shorter). Big news between reports, such as earnings releases, acquisitions or executive changes, arrives in an 8-K.
Read it in this order
Start with Item 1, Business: what the company sells, to whom, and how it is organised into segments. Then Item 7, Management’s Discussion and Analysis, where management explains why the numbers moved. Only then open Item 8, the financial statements, with a question in mind.
Item 1A, Risk Factors, is long and partly boilerplate. Skim it for risks that are specific to this company, and compare it with last year’s version: new risks are the interesting ones.
Three questions worth answering
Is revenue growing, and is the growth coming from price, volume or acquisitions? Is profit growing at least as fast as revenue, or are margins being squeezed? Does the cash flow statement confirm the profit, or is profit running well ahead of cash?
If you can answer those three from the filing, you already understand the company better than most headlines do.