Financial reports are financial statements and financial analysis reports that all US listed companies must submit to the US Securities and Exchange Commission (SEC) regularly or irregularly, clearly and comprehensively disclosing the company's operating conditions during the financial report statistical period.

Understanding a company's financial report can give you an intuitive understanding of a company. As a potential investor, it is very necessary to analyze the company's investment value through public financial reports and changes. So how could you analyze financial reports?

Classification of financial reports

Based on the frequency of reporting, financial reports are mainly divided into the following categories:

• 10-K financial report (10-K Report) must be submitted after the end of each year, also often called 10-K form (Form 10-K)
• 10-Q financial report (10-Q Report) must be submitted after the end of each quarter, also often called 10-Q form (Form 10-Q)
• 8-K financial report (8-K Report) must be submitted when the company has important financial changes, personnel changes, etc., also often called 8-K form (Form 8-K)

（ quarters and years refer to the quarters and years in the company's financial year, which are not necessarily synchronized with the natural year. For example, Apple's financial year is the end of September every year.）

What is a 10-K financial report?

The 10-K financial report summarizes the changes in the company's finances throughout the fiscal year and is the company's most important financial report. In addition to operating conditions, the 10-K financial report will record in detail the company's analysis, discussion, and risk factor discussion of the year's operations. Therefore, investors can focus on the 10-K financial report to obtain important information from it.

The 10-K financial report mainly consists of four parts, including fifteen sub-items. Take Apple's latest 10-K financial report as an example:

source：SEC

The four parts of the 10-K financial report are as follows:

• Part 1：Operating status, product/service content, future risks, held assets, related legal cases, etc.
• Part 2：Number of shares issued, comprehensive operating statements, income statement, balance sheet, shareholder equity statement, cash flow statement, etc.
• Part 3：Relevant information of the company's management and board of directors, personnel information, salary information, etc.
• Part 4：Appendix to the report, copy of the contract, declaration documents, etc.

What information in the 10-K financial report is worth paying attention to?

When making a company investment value judgment, you can focus on Item 1, Item 7 and Item 8 in the 10-K financial report.

✓Item 1: Business

Mainly describes the company's main products and services, currently owned subsidiaries, and operating markets. It may also include recent events about the company, the competition faced by the company, regulatory information applicable to labor issues, and special operating costs or seasonal factors.

• Item 1A: Risk Factors

This section mainly contains information on the most significant risks applicable to the company's development or its securities trading. Companies usually list different risk factors in order of importance.

• Item 1B: Unresolved Staff Comments

This section requires the company to explain certain comments it received from SEC staff on previously submitted reports, mainly some comments that have not been resolved or answered after a long period of time. Investors can check in this section whether the company has questions or issues raised by the US Securities and Exchange Commission that have not been resolved.

✓Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations

MD&A mainly discloses the company’s management’s views on the operating results of the previous fiscal year, allowing investors to understand the company’s business development history and profitability through management’s analysis and comments on the company’s past performance. This part often includes the company’s operations and financial performance in the past fiscal year, and uncertainties that may have a significant impact on the company’s performance.

✓Item 8: Financial Statements and Supplementary Data

Item 8 can be said to be the most important part of this 10-K financial report, providing the company’s income statement, balance sheet, cash flow statement and shareholders’ equity statement. It allows investors to intuitively view the comparison of financial data for the past year or two in the report, and use the data to calculate the company’s profit ratios, such as return on assets, return on equity, return on capital, etc., to evaluate the company’s investment value from more dimensions.

For most audit reports, auditors will indicate that the financial statements fairly reflect the company's financial condition in accordance with generally accepted accounting principles by marking "unqualified opinion". However, if the auditor marks "qualified opinion" or "disclaimer of opinion", investors should carefully check the reasons.

Follow us

Find us on Twitter, Instagram, YouTube, and TikTok for frequent updates on all things investing.

Have a financial topic you would like to discuss? Head over to the uSMART Community to share your thoughts and insights about the market! Click the picture below to download and explore uSMART app！

Important Notice and Disclaimer:

We have based this article on our internal research and information available to the public from sources we believe to be reliable. While we have taken all reasonable care in preparing this article, we do not represent the information contained in this article is accurate or complete and we accept no responsibility for errors of fact or for any opinion expressed in this article. Opinions, projections and estimates reflect our assessments as of the article date and are subject to change. We have no obligation to notify you or anyone of any such change. You must make your own independent judgment with respect to any matter contained in this article. Neither we or our respective directors, officers or employees will be responsible for any losses or damages which any person may suffer or incur as a result of relying upon anything stated or omitted from this article.

This document should not be construed in any jurisdiction as constituting an offer, solicitation, recommendation, inducement, endorsement, opinion, or guarantee to purchase, sell, or trade any securities, financial products, or instruments or to engage in any investment or any transaction of any kind, nor is there any intention to solicit or invite the purchase or sale of any securities.

The value of these securities and the income from them may fall or rise. Your investment is subject to investment risk, including loss of income and capital invested. Past performance figures as well as any projection or forecast used in this article is not indicative of its future performance.

This advertisement has not been reviewed by the Monetary Authority of Singapore