1.) The Annual Report: The annual report is a document released by companies at the end of their fiscal year which includes almost everything an investor needs to know about the business. It generally contains pictures of facilities, branch offices, employees, and products, all of which are completely unimportant to making your investing decision. They are normally followed by a letter from the CEO and other senior management which discusses the past as well as upcoming year. Tucked away in the back of most annual reports is a collection of financial documents. Most of the time you can go onto a company's website and find the Investor Relations link. From there, you should be able to either download the annual report in PDF form or find information on how to contact shareholder services and request a copy in the mail.
2.) The 10K: This is a document filed with the SEC which contains a detailed explanation of a business. It is reported annually and contains the same financial statements the annual report does, in a more detailed form. The benefit of the 10K is that it allows you to find out additional information such as the amount of stock options awarded to executives at the company, as well as a more in-depth discussion of the nature of the business and marketplace. Sometimes you will find that a company has no financial statements in the 10K, but instead has written, "incorporated herein by reference" This means that the financial statements can be found elsewhere, such as in the annual report or another publication. Even if this is the case, it is still worth it to get a copy. You can find this by contacting the company, visiting their website, or going to FreeEdgar (freeedgar.com) or SEC.gov.
3.) The 10Q: The is similar to the 10K, but is filed quarterly (four times a year - normally the end of January, June, September, and December). If the company is planning on changing its dividend policy, or something equally as important, they may bury it in the 10Q. These documents are critical and can be obtained in the same way as the annual report and 10K.
You will want to get a copy of all three documents for the past year or two from the company in which you are interested in making an investment. Most of them can be found at http://finance.yahoo.com - type in the ticker symbol of the company you want to research and then click the "Financials" link. This will bring up a copy of the latest quarterly financial statements. (For all good purposes, I would recommend you first analyze the annual balance sheet, which can be found by clicking "annual data" in the upper right hand corner.) As always, it is best to get the information directly from the company. You can head to the Investor Relations section on its corporate website (nearly all of them have one), and download free copies of the reports, all available for free, which you can then save for review. This not only saves paper and keeps your desk from piling up with clutter, it makes it much easier to review several years of annual reports at once, seeing how management's expectations played out in subsequent periods, helping you gauge how realistic and honest the executives are when communicating with the owners.
Another trick you will want to employ in your own analysis is to request and study the balance sheets, income statements, and cash flow statements of companies in the same industry at the same time. It can help you understand an oil company better if, say, you are studying all of the major oil companies at the same time. With the other firms fresh in your mind, differences, both positive and negative, are more likely to stand out and get your attention when calculating financial ratios or determining whether one corporation has a significant cost advantage over the other (and, just as importantly, why that cost advantage exists and whether or not it is sustainable). This is true for every industry in existence - it doesn't matter if you are reading the annual reports and 10K filings of chocolate companies, automobile manufacturers, newspapers, banks, gold mine operators, real estate developers, packaged food giants, soda bottlers, farm equipment suppliers, coffee shops, discount retailers, or theme parks. If one business mentions a new accounting rule that is going to influence results substantially, and another only glosses over it, that would raise red flags for the latter firm in my mind. Likewise, one company may point out a compelling opportunity the industry is facing, while other, more conservative firms don't expand on anything more than the results produced during the reporting period.
This page is part of Investing Lesson 3 - Understanding the Balance Sheet. To go back to the beginning, see the Table of Contents. If you have already read this lesson, you can skip directly to the Balance Sheet Quiz.