How to quickly spot key information in SEC filings?
In the previous article, you learned about the important SEC filings and how they could assist trading decisions. But when you download the files and first open the documents, you could be surprised by the size of them, which can often be in excess of 100 pages.
However, all of these filings are divided into easy-to-understand sections in order to make them easier to follow, and here are some tips on how you can fast-read SEC filings.
Sections of SEC filings
1. Business overview—A description of the business, risk factors, legal proceedings for and against the company, and matters to vote.
2. Financial overview—A review of the company's performance over the period, management's discussion and analysis of the results, changes in accounting procedures or disclosures, and supplementary data.
3. Governance overview—A review of executive compensation, beneficial ownership by management, relationships with directors, and accounting fees.
Key parts of SEC filings:
While all of these sections contain important information for investors, there are a lot of regulatory disclosures that can be ignored.
Before we head into further discussion, let's clarify the key parts of 10-Q and 10-K filings, namely balance sheets, income statements, and cash flow statements.
Balance sheet: assets versus its liabilities
Income statements: revenues and profits
Cash flow statements: cash flows in and out of the bank
Steps to speed-read SEC filings:
1. Get information from the source
The "Financial Statements and Supplementary Data" section represents the meat and potatoes of the 10-Q and 10-K, by providing a comprehensive financial overview of the period.
2. Get the true story behind the headlines
The "Management Discussion and Analysis" section is perhaps the most important section to help you understand the reason for changes in revenues, margins, and other metrics on the financial statements.
3. Check for accounting irregularities
The "Footnotes to the Financial Statements" contains important information that can help investors avoid potential fraudulent situations. You can especially focus on revenue recognition, intangible assets and depreciation.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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DontBuyHighSellLow : Thanks for the great tips. Even for a financial graduate student, these information is also difficult to review. For now, I will usually just look at debt ratio and how they spend the money. Hate it when the co. execs use public's money to for personal growth.
iSpyderTrader : Thanks for the awesome article. Great information.
Mark Dennis : Cool
GM 1 DontBuyHighSellLow: How do you spot the ‘use public funds for personal growth’?
garnet4david2001 : Please like my comment
win 11118 : Nice
Mishka David Snyder : thanks
Kastella : thanks for sharing such valuable information!!
red087 : wow
lucky moo moo : Thank
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