How do you read a 10-K quickly?
Read the auditor's report first, then MD&A, the 3 main financial statements, the new risk factors and the exhibits. The SEC requires every 10-K to follow a set order of topics (Investor.gov), so the same 20-minute route works for any US public company.
What is in a 10-K?
A 10-K is a US public company's annual report to the SEC. It describes what the company does, the risks it faces and its audited financial statements (Investor.gov). Part I holds Item 1 Business, Item 1A Risk Factors, Item 1C Cybersecurity and Item 3 Legal Proceedings; Part II holds Item 7 MD&A and Item 8 Financial Statements and Supplementary Data (American Express 2023 10-K contents). Exhibits come at the end.
When is a 10-K filed?
Within 60 days of fiscal year end for large accelerated filers, 75 days for accelerated filers and 90 days for other filers (Cleary Gottlieb; Olshan). A large accelerated filer has a public float of more than $700 million, among other tests (Cornell LII).
Step 1. Read the auditor's report (2 minutes)
Find the report of the independent registered public accounting firm in Item 8. Check the opinion is unqualified and look for a going concern paragraph. Then read the critical audit matters: the matters the auditor found especially challenging, subjective or complex. Auditors of large accelerated filers have reported them for fiscal years ending on or after 30 June 2019, and of most other filers since fiscal years ending on or after 15 December 2020, with emerging growth companies exempt (Goodwin). They point you to the hardest numbers in the accounts.
Step 2. Read MD&A, Item 7 (6 minutes)
Management's discussion and analysis explains the year in management's words. Read the overview, the results of operations by segment and the liquidity and capital resources section. Note what management says drove revenue and margins, and compare it with what it said a year earlier. A cause that changes each year is worth a question.
Step 3. Read the 3 statements, Item 8 (6 minutes)
Look at the income statement, the balance sheet and the cash flow statement side by side for the 2 or 3 years shown. Check that operating cash flow tracks net income, that receivables and inventory are not growing much faster than revenue, and how debt and cash moved. Then skim the notes on revenue recognition, debt and commitments.
Step 4. Read only the changed risk factors, Item 1A (3 minutes)
Risk factors run long and change little. Open last year's 10-K next to this one and look for risks that are new, moved up or rewritten. A new risk factor often marks something management now worries about. Read Item 1C on cybersecurity and Item 3 on legal proceedings in the same pass.
Step 5. Scan the exhibits (3 minutes)
Open the exhibit index. Exhibit 21 lists subsidiaries and their jurisdictions; how to find a company's subsidiaries explains how to read it. Material contracts, credit agreements and executive employment agreements are also filed as exhibits. Business, Item 1, is a good place to start if the company is new to you (Investor.gov); skip it if you know the company.
What does a 10-K not tell you?
A 10-K is up to 90 days old when filed and describes a year that has already ended. Events since then appear in 10-Qs and 8-Ks; how to read an 8-K filing covers the second. Private companies file no 10-K at all; for those, start with how to research a private company.
Where does Tamarly Intelligence help?
Tamarly Intelligence is Tamarly's research platform on companies, funds, countries and markets, built from official filings and open data. It reads SEC EDGAR filings and links every figure to the filing it came from. 13F institutional holders are shown on company pages. Tamarly shows no market prices.
Research companies with every figure linked to its filing, free for 7 days
Frequently asked questions
What is the most important section of a 10-K?
For most readers, Item 7 MD&A and Item 8 financial statements, read together. MD&A explains the numbers and Item 8 holds the audited figures and the auditor's report, including critical audit matters.
How long is a 10-K due after year end?
60 days for large accelerated filers, 75 days for accelerated filers and 90 days for other filers (Cleary Gottlieb). A company with a 31 December year end and a public float above $700 million files by early March.
Where can you read 10-Ks for free?
On SEC EDGAR. All 10-Ks and 10-Qs filed with the SEC are public there (Investor.gov). Search the company name, filter filings to 10-K and open the latest.
About the author. Melvine Manchau is the founder of Tamarly and author of the Tamarly Newsletter. He previously worked at PwC, Salesforce, BlackRock/eFront and Lazard.
About Tamarly Research. Tamarly Research is part of Tamarly Media, which holds no investment positions. Tamarly is a New York research house that studies how AI is changing regulated institutions.