Sep 30, 2025 · 11 min read
The Complete Guide to Reading a 10-K Annual Report
Learn how to read a 10-K filing like a professional investor. We break down every section and show you what actually matters.
The 10-K is the most important document a public company files with the SEC. It's the official annual report—audited financials, business strategy, risk factors, and management's honest assessment of the company, all in one place.
But 10-Ks are intimidating. Apple's 2024 10-K is 86 pages. Berkshire Hathaway's is over 150. Where do you even start?
This guide teaches you how to read a 10-K like a professional investor. We'll break down every section, explain what actually matters, and show you what to look for. By the end, you'll be able to pick up any 10-K and extract the information you need.
What is a 10-K?
A 10-K is the annual report that every public company must file with the Securities and Exchange Commission (SEC). Unlike glossy shareholder reports with photos and marketing messages, the 10-K is a legal document with strict requirements about what must be disclosed.
Key facts about 10-Ks:
- Filed within 60-90 days after a company's fiscal year ends (depending on company size)
- Contains audited financial statements reviewed by independent accountants
- Includes forward-looking statements that are legally protected
- Must disclose material risks, even if embarrassing
- Available for free on SEC EDGAR and Earnings Feed
The 10-K is where companies can't hide. Marketing materials can spin anything positive, but the 10-K has legal consequences for misrepresentation. That's why professional investors start here.
The Structure of a 10-K
Every 10-K follows the same structure mandated by the SEC. Once you learn the layout, you can navigate any company's filing quickly.
Part I: The Business
| Item | What It Contains | Why It Matters |
|---|---|---|
| Item 1: Business | What the company does, how it makes money, competitive landscape | Understand the business model |
| Item 1A: Risk Factors | Everything that could go wrong | See what management worries about |
| Item 1B: Unresolved Staff Comments | SEC concerns not yet addressed | Red flag if populated |
| Item 1C: Cybersecurity | Security programs and incidents | New requirement as of 2023 |
| Item 2: Properties | Real estate and facilities | Asset base, lease obligations |
| Item 3: Legal Proceedings | Lawsuits and regulatory actions | Potential liabilities |
| Item 4: Mine Safety | Mining companies only | Skip unless relevant |
Part II: Financial Information
| Item | What It Contains | Why It Matters |
|---|---|---|
| Item 5: Market for Common Equity | Stock info, dividends, buybacks | Capital return policy |
| Item 6: Reserved | Previously selected financial data | Now empty (rule changed) |
| Item 7: MD&A | Management's Discussion and Analysis | The narrative behind the numbers |
| Item 7A: Market Risk | Interest rate, currency, commodity exposure | How macro factors affect the business |
| Item 8: Financial Statements | Income statement, balance sheet, cash flow, notes | The actual numbers |
| Item 9: Disagreements with Accountants | Auditor conflicts | Major red flag if populated |
| Item 9A: Controls and Procedures | Internal control effectiveness | Audit quality indicator |
Part III: Governance
| Item | What It Contains | Why It Matters |
|---|---|---|
| Item 10: Directors and Officers | Board members, executives, code of ethics | Who's running the company |
| Item 11: Executive Compensation | Pay packages, bonuses, stock awards | Alignment with shareholders |
| Item 12: Security Ownership | Who owns the stock | Insider and institutional holdings |
| Item 13: Related Party Transactions | Deals with insiders | Potential conflicts of interest |
| Item 14: Accounting Fees | What they pay auditors | Independence concerns |
Part IV: Exhibits
| Item | What It Contains | Why It Matters |
|---|---|---|
| Item 15: Exhibits and Schedules | Supporting documents, contracts, certifications | The details behind disclosures |
The 5 Sections You Should Always Read
You don't need to read every page. Professional investors focus on five sections that contain the most valuable information.
1. Risk Factors (Item 1A)
What it is: A comprehensive list of everything that could hurt the company's business, stock price, or ability to operate.
Why it matters: Companies must disclose material risks or face legal liability. This section tells you what keeps management up at night—and what could surprise investors later.
What to look for:
- New risks: Compare to last year's 10-K. New risk factors often signal emerging problems.
- Specific vs. generic: "Competition could reduce our market share" is boilerplate. "We are currently under investigation by the Department of Justice" is specific and concerning.
- Order changes: Risks listed first are typically most significant. If something moved up, pay attention.
- Quantified risks: "A 10% increase in raw material costs would reduce margins by $50 million" tells you more than vague warnings.
Example red flag: In 2019, Boeing added new language about "regulation of our commercial aircraft" to their risk factors after the 737 MAX crashes. Investors who noticed this early understood the legal exposure before analysts fully priced it in.
2. Management's Discussion and Analysis (Item 7)
What it is: Management's narrative explanation of the financial results—what happened, why it happened, and what they expect going forward.
Why it matters: MD&A translates the numbers into plain English. It's where management explains one-time items, segment performance, and future outlook. This is often the most readable section.
What to look for:
- Revenue drivers: What caused growth or decline? New products, pricing, volume, acquisitions?
- Margin trends: How are gross and operating margins changing? What's driving the change?
- Cash flow discussion: How does the company convert profits to cash? What are the major uses of cash?
- Forward guidance: Look for words like "expect," "anticipate," "believe." These signal management's outlook.
- Non-GAAP metrics: Companies often highlight adjusted earnings. Understand what they're adjusting for and why.
Example insight: In their MD&A, Netflix discusses subscriber growth by region. When you see "paid net additions in UCAN (United States and Canada) declined year-over-year," you understand their growth challenge before looking at any numbers.
3. Financial Statements (Item 8)
What it is: The audited income statement, balance sheet, cash flow statement, and accompanying notes.
Why it matters: This is the definitive record of the company's financial position. Everything else in the 10-K is commentary; this is the data.
Key statements to review:
Income Statement (Statement of Operations)
- Revenue trend over the three years shown
- Gross margin (revenue minus cost of goods sold)
- Operating income (after operating expenses)
- Net income (the bottom line)
- Earnings per share (EPS)
Balance Sheet (Statement of Financial Position)
- Cash and equivalents: Can they pay their bills?
- Debt levels: Short-term and long-term obligations
- Shareholders' equity: Book value of the company
- Goodwill: How much came from acquisitions?
Cash Flow Statement (often most important)
- Operating cash flow: Cash generated by the business
- Capital expenditures: Investment in the business
- Free cash flow: Operating cash flow minus capex
- Financing activities: Debt, buybacks, dividends
What to look for:
- Cash flow vs. earnings: A company reporting profits but burning cash is a red flag. Look for operating cash flow that exceeds net income.
- Debt maturities: When does debt come due? Is refinancing a concern?
- Working capital trends: Are receivables growing faster than revenue? That can signal collection problems.
- Footnotes: The real details are in the notes. Revenue recognition policies, pension obligations, lease commitments—it's all here.
4. Business Description (Item 1)
What it is: An overview of what the company does, its products and services, competitive position, and industry dynamics.
Why it matters: You can't analyze a company you don't understand. This section explains the business model in detail that marketing materials gloss over.
What to look for:
- Revenue segments: How does the company break down its business? Which segments are growing?
- Customer concentration: Do they depend on a few large customers? What happens if they lose one?
- Competitive advantages: What do they claim makes them special? Is it defensible?
- Seasonality: When are the strong and weak quarters? Important for timing expectations.
- Regulation: What rules govern this industry? What happens if regulations change?
Example insight: Reading Amazon's business description reveals that AWS (Amazon Web Services) operates as a completely separate segment from retail. Understanding this helps you see Amazon as two different businesses with different economics.
5. Related Party Transactions (Item 13)
What it is: Disclosure of any business dealings between the company and its insiders—executives, board members, or their family members.
Why it matters: Conflicts of interest hide here. When executives do business with the company they run, shareholders need to know.
What to look for:
- Real estate deals: Companies leasing property from executives
- Consulting arrangements: Payments to board members' firms
- Employment of relatives: Family members on the payroll
- Loans to executives: Mostly prohibited now, but watch for creative arrangements
- Investments: The company investing in executives' other ventures
Red flag: If you see complex arrangements with entities controlled by the CEO, dig deeper. Not all related party transactions are problems, but undisclosed conflicts have been at the heart of many corporate frauds.
How to Read a 10-K Efficiently
Professional investors don't read 10-Ks cover to cover. Here's a practical approach:
First Pass (15-20 minutes)
- Skim Item 1A Risk Factors: Look for anything surprising or newly added
- Jump to MD&A: Read the overview and any sections about challenges or uncertainties
- Check the auditor's opinion (beginning of Item 8): Should be "unqualified"—anything else is a red flag
- Look at the cash flow statement: Is operating cash flow positive and growing?
Deep Dive (1-2 hours)
- Read Item 1 Business to understand the model
- Study the full MD&A including segment discussions
- Analyze the three financial statements and key footnotes
- Compare to prior year: What changed in risk factors, accounting policies, or segment performance?
Ongoing Monitoring
- Read quarterly 10-Qs for updates
- Watch for 8-K filings about material events
- Compare actual results to management's forward-looking statements from prior filings
Common 10-K Red Flags
Watch for these warning signs that deserve deeper investigation:
| Red Flag | Where to Find It | What It Means |
|---|---|---|
| Auditor change | Item 9, 8-K filing | New auditor might mean disagreements over accounting |
| "Material weakness" in controls | Item 9A | The company can't ensure accurate financial reporting |
| Going concern warning | Auditor's opinion | Auditor doubts the company can survive another year |
| Restated financials | Item 8 notes | Prior numbers were wrong |
| Related party transactions | Item 13 | Potential conflicts of interest |
| New major risk factors | Item 1A | Emerging problems |
| Declining cash flow despite rising earnings | Cash flow statement | Earnings quality concerns |
| Receivables growing faster than sales | Balance sheet, MD&A | Customers may not be paying |
| Large goodwill relative to equity | Balance sheet | Overpaid for acquisitions; impairment risk |
10-K Filing Deadlines
Companies have different deadlines based on their size:
| Filer Type | Public Float | Deadline After Fiscal Year End |
|---|---|---|
| Large Accelerated Filer | $700M+ | 60 days |
| Accelerated Filer | $75M - $700M | 75 days |
| Non-Accelerated Filer | Under $75M | 90 days |
Public float is the value of shares held by outside investors (not insiders).
Most large, well-known companies are Large Accelerated Filers, so their 10-Ks appear within 60 days of year-end. For a December fiscal year, that means late February.
How to Find 10-K Filings
SEC EDGAR (Official Source)
All 10-Ks are available for free at SEC EDGAR. Search by company name or ticker.
Earnings Feed (Easier Interface)
Earnings Feed provides a cleaner interface with:
- Real-time updates when new 10-Ks file
- Company profiles with all filings in one place
- Filtering by exchange, industry, or date
- Mobile-friendly viewing
Company Investor Relations
Most companies post 10-Ks on their investor relations website, often in a "SEC Filings" section.
Practice: Reading Your First 10-K
The best way to learn is to practice. Pick a company you know well—maybe one whose products you use—and read their 10-K.
Suggested approach:
- Go to Earnings Feed's 10-K hub and find the company
- Start with Risk Factors (Item 1A)—see if anything surprises you
- Read the MD&A to understand recent performance
- Look at the cash flow statement—is cash flow positive?
- Note three things you learned that weren't obvious from news coverage
Companies with readable 10-Ks for beginners:
- Apple (AAPL): Clear segments, straightforward business
- Costco (COST): Simple model, interesting membership economics
- Starbucks (SBUX): Easy to understand, global operations
- Nike (NKE): Brand business, good segment breakdown
Summary
The 10-K is the most important document for understanding a public company. It contains information you won't find anywhere else—risks management would rather not discuss, accounting details that change how you interpret earnings, and forward-looking statements that reveal expectations.
Key takeaways:
- Focus on five sections: Risk Factors, MD&A, Financial Statements, Business Description, and Related Party Transactions
- Compare to prior years—changes often matter more than absolutes
- Watch for red flags: auditor changes, control weaknesses, going concern warnings
- Cash flow often tells a truer story than earnings
- The footnotes contain critical details
Start with companies you know, practice regularly, and you'll develop the skill to analyze any 10-K efficiently.
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