Knowing the Difference Between a 10-K, 10-Q and an 8-K
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If you want to become a serious investor, then you need to start reading SEC filings religiously. You should have a pile of 10-K's, 10-Q's and 8-K's sitting on your bedside table. You should have a stack of 10-Q's as your reading material in the bathroom. If you are stuck in traffic, you should be able to pop open your glove compartment and have a couple of 10-K's waiting for you to read. They are THAT important if you want to become a successful investor over time.
What are 10-K's, 10-Q's and 8-K's? They are the most common SEC filings that you will come across. More than likely, the companies that you are considering investing in file with the SEC. All but the smallest of companies are required to file with the SEC.
Why are they important?
Companies are forced to completely disclose pertinent information about their business and corporate structure to investors. How much are they paying the CEO? They have to say. How much did they pay for the company that they acquired last year? They have to say. How much is the company spending on their lease? They have to say. All of this information is contained within the company's SEC filings.
Before we go on, let's explain what the 10-K, 10-Q and 8-K are.
10-Q - this is a company's quarterly report. As a general rule, the 10-Q is less detailed than the annual report. Companies are required to file their 10-Q within 35 days of the end of their quarter. The financial statements that are included in a quarterly report are generally unaudited.
10-K - the annual report that is filed (yearly) by a company. This is an extremely in-depth document that contains everything that you ever wanted to know about the company. Executive compensation. Audited financial statements. Organization structure. Etc. Etc.
8-K - a form that is filed by companies to inform their shareholders of "unscheduled material events that are important to shareholders". CFO leaves. SEC is launching an investigation. The company announces a new business deal. Delisting notice. Shutting down a plant. Layoffs. Bankruptcy. These are all material events that would require an 8-K to be filed. The 8-K is extremely common, and many companies will file a number of 8-K's throughout the course of a quarter.
Now, why are these forms important?
SEC filings deliver the pure information about a company, unblemished by brokerage analysis. You can find out everything that you ever wanted to know about a company, just by skimming through the pages of their quarterly or annual reports. How much cash do they have on hand? How are their European operations progressing? What kind of compensation package does the CEO of the company have? It's all in there.
These are obviously all important questions. You can't rely on analysts or the company itself to tell you what you need to know.
SEC filings. Read them. Love them. Make money from them.
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Filed under:
Stock Market Education |
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