Fundamental Analysis For Dummies, 2nd Edition

Chapter 12

Using the Annual Report (10-K) to See What a Company Is Worth

IN THIS CHAPTER

Understanding what data fundamental analysts should be on the lookout for in the annual report

Getting a game plan on how to logically read an annual report and find the things that matter

Pinpointing seemingly minute details that have large meaning for fundamental analysis

Tuning into valuable information auditing firms share about companies

Ah, springtime. It’s the time of the year when most people are listening to the birds singing or enjoying their green lawns. Fundamental analysts are like most people. During the spring, fundamental investors are rushing to read companies’ annual report to shareholders. These are hefty documents full of just about everything fundamental analysts search for. The annual report to shareholders and the closely related official annual report called the 10-K, for many fundamental analysts, are the single, most important documents a company provides to investors all year. Think of these annual reports as the company’s published State of the Union Address, a source of information of where the business was and where it is headed. Just as the State of the Union Address is a chance for the president to stir up hopes for the nation, the annual report is a company’s chance to do a bit of flag-waving for itself, too. But the document also is clinically accurate in measuring how the company — and management — did during the year.

The annual report to shareholders and ...