Wall Street Prep: Analyzing Financial Reports, Complete solution

Wall Street Prep: Analyzing Financial Reports, Complete solution Securities and Exchange Commission Public companies must submit quarterly and annual filings with the SEC, which makes these available to the public Also requires companies disclose when there's a merger, a sale of securities, a shareholder vote, buying and selling of shares by management and insiders, etc. Finding Financial Reports SEC makes filings public information Also: Company website Data services Primary Filings for Common Analyses 10-K 10-Q 8-K (Ex. Earnings press releases) Proxy 20-F Primary Filings for M&A Analysis Finding filings is important for performing a precedent transactions analysis and premiums paid analysis Initial Screen: Services like Capital IQ Then, the relevant filings for the prior deals need to be aggregated to perform the analysis Form 10-K (Annual Filing) At the end of each fiscal year, publicly-traded companies must file this report Provides comprehensive information about a company's financial and operational performance during the year Includes: Thorough overview of their businesses and finances; financial statements Must be filed within 60-90 days within year end Financial professionals substantially depend on this to analyze year-over-year and company comparisons SEC and FASB outline in great detail how info should be presented in the document Why is the 10-K important? Provides the most detailed overview of companies' financial operations and regulations governing them 10-K vs. Annual Report Annual Report: Not a required SEC filing Companies have a lot of latitude in the structure and contents May contain details not reported elsewhere, but are typically self-marketing 10-K: Presents a more detailed and unfettered picture of the company’s operations and situation Annual Report Issued at the end of each year Contains similar if not identical information to the 10-K 10-K: Part I Business Risk Factors Unresolved Staff Comments Properties Legal Proceedings Mine Safety Disclosures 10-K: Business Most important part of 10-K Company business, strategy, product offering, seasonality, and geographical footprint 10-K Part II Where most of the "red meat exists," specifically in Item 6, 7, and 8 10-K: Part III What is the difference between an annual report and a 10-K? Annual Report: Glossy document with select financial figures, letter to the shareholders, and sometimes the actual 10-K or a condensed version 10-K: Where you want to go to make sure you're using the right information 10-Q Reports Must be Filed... Three times annually Which forms are audited? Only the 10-K For ALL accelerated filers, 10-K's must be filed... No later than 60 days after the fiscal year-end date 10-K Part I: Business Identifies the general overview about the business, the business strategy, the key products, markets and distribution, competition, number of employees Allows you to familiarize yourself with the business 10-K Part I: Unresolved Staff Comments SEC comments outstanding ( 6 months) Would be a red flag for a company 10-K Part I: Risk Factors Summary of industry- and company-specific risks Generally pretty obvious and doesn't provide a lot of helpful information (this would be in MD&A section) 10-K Part II: Market for Equity, Related Stockholder Matters, Purchases of Equity Stock price/dividend history; company listing details Outlines stock price range during the four quarters, dividend info, general market performance, etc. 10-K Part II: Selected Financial Data Key financial statistics for a company's most recent 5-10 fiscal year period Can be very useful for some companies that choose to put significant disclosures in Part of the core portion of the 10-K 10-K Part II: MD&A