How to Read a 10-K: The Only 5 Sections That Matter
Skip the boilerplate. Focus on these 5 sections to analyze any company's 10-K in 20 minutes, plus the red flags that signal trouble.
I've read hundreds of 10-Ks at this point. The first few took me hours. Now I can pull the important stuff out of most filings in 20-30 minutes.
The trick isn't reading faster. It's knowing what to skip.
A 10-K is the annual report every U.S. public company files with the SEC. Audited financials, business description, risk factors, and management's narrative of what happened. If you want to understand a business beyond headlines and slide decks, you start here.
The problem: these things are long. Apple's runs dozens of pages. Some financials push past a hundred. If you try to read front to back, you'll burn out fast. I did, more than once, before I figured out a better approach.
This guide is how I actually read 10-Ks now: where to start, what to ignore, what to read carefully, and how to spot red flags.
How I Actually Read a 10-K
I don't read them in order. That's a waste of time. I read them in priority order:
- Scan Risk Factors and MD&A to understand what changed and what management is worried about.
- Drop into the financial statements and cash flow to see if the numbers support the story.
- Check related party transactions and controls for oversight issues.
- Compare to last year's 10-K. Changed risks, new footnotes, major shifts in wording.
Think of the 10-K as a map, not a novel. Jump around. That's what the pros do.
What Is a 10-K?
A 10-K is the legally required annual report that U.S. public companies file with the SEC. Unlike glossy annual reports designed for marketing, the 10-K is tightly regulated. There are rules about what must be disclosed.
Key facts:
- Filed once per year, usually 60-90 days after fiscal year end, depending on company size.
- The financial statements are audited by an independent accounting firm.
- Companies must disclose material risks and significant legal or regulatory issues.
- Forward-looking statements are included but wrapped in legal safe-harbor language.
- Every 10-K is available free on SEC EDGAR and via tools like Earnings Feed.
The 10-K is where companies have the least room to spin. This document has legal consequences. Marketing can be optimistic. The 10-K has to be accurate.
The Structure of a 10-K
Every 10-K follows the same basic layout. Once you know the structure, you can work through any filing quickly.
Part I covers the business and its risks: what the company does (Item 1), risk factors (Item 1A), cybersecurity (Item 1C), properties, and legal proceedings.
Part II covers financial performance: MD&A (Item 7), market risk (Item 7A), the audited financial statements and notes (Item 8), and internal controls (Item 9A).
Part III covers people and oversight: directors and officers, exec pay, security ownership, and related party transactions.
Part IV is exhibits: contracts, credit agreements, certifications.
You don't need to read every part with equal intensity. Most of Part III is boring unless something's wrong. Part IV is for when you need to check specific contract terms.
The Five Sections That Deserve Your Time
These are the sections I actually read for every company I care about. Everything else is optional.
1. Risk Factors (Item 1A)
Risk Factors is a long list of things that could materially harm the business or the stock.
Why it matters: companies are legally on the hook here. If they know about a material risk and fail to disclose it, they're exposed. That makes Item 1A more candid than most corporate communications, within the limits of legal drafting.
When I read Risk Factors, I focus on changes and specificity, not the sheer length.
Compare to last year. New risk factors often signal emerging trouble: new regulatory investigations, dependence on a single customer, rising input costs. I keep last year's 10-K open in another tab and diff the Risk Factors by eye.
Watch for specific disclosures. Generic lines about "competition" or "macroeconomic conditions" are boilerplate. Everyone has those. A line about an ongoing DOJ investigation is not boilerplate.
Notice ordering and emphasis. Risks higher up or heavily detailed are rarely random. If something moves from the bottom of the list to the top, ask why.
Look for numbers. Any risk that includes specific dollar amounts or percentages is worth a second read.
I've found some of my best short ideas by noticing new risks that the market hadn't priced in yet.
2. Management's Discussion and Analysis (Item 7)
MD&A is management's explanation of the year in plain-ish English: what happened in the business, why the numbers look the way they do, and what they think comes next.
This is the closest you get to sitting in a room with management while they walk through the year. It's also where they frame "one-time" items, restructuring charges, and non-GAAP metrics.
I use MD&A to answer a few questions:
What actually drove the numbers? Was revenue growth driven by volume, pricing, mix, acquisitions? Did margins expand because of cost cuts or because of a one-off tailwind?
How healthy is the cash generation? Good MD&A ties earnings to cash: why cash flow went up or down, what's happening with working capital, how capex is trending.
What's management telling you about the future? Look for "we expect," "we believe," "we anticipate." Note how specific they are and how that compares to prior years.
How do their non-GAAP metrics work? Adjusted earnings aren't evil by default, but you should understand what's being adjusted out and whether those adjustments keep recurring.
Over time, I've noticed tone shifts in MD&A often show up before they're obvious in the numbers. Optimistic language turning cautious. Or the other direction.
3. Financial Statements and Notes (Item 8)
Item 8 is where the audited numbers live: income statement, balance sheet, cash flow statement, plus all the footnotes that explain how those numbers came to be.
My workflow:
Start with the cash flow statement. This is the most important financial statement. If net income is rising but operating cash flow is flat or falling, you already have a question to answer. I always look here first.
Scan the income statement. Look at trends over the three years shown: revenue, gross margin, operating margin, net income. You're trying to understand the basic shape of the business.
Check the balance sheet for debt levels. How much debt is there, when does it mature, and how does that compare to cash on hand? How large is goodwill relative to equity?
Read key footnotes. Revenue recognition, segment information, stock-based compensation, leases, pension obligations, and commitments/contingencies. These can change how you interpret the headline numbers.
One simple rule I follow: if cash flow and earnings are moving in opposite directions without a very good explanation, slow down and dig into the notes.
4. Business Description (Item 1)
The Business section explains what the company actually does. That sounds basic, but the level of detail here is much better than in marketing or press releases.
I'm looking to answer:
- How does this company make money? Products, services, subscriptions, licenses, ads?
- How is the business segmented, and which segments are growing or shrinking?
- How concentrated is the customer base? Losing one or two big customers could be fatal in some industries.
- What does the competitive picture look like? Commodity competition, network effects, heavy regulation?
If I can't explain the business model clearly after reading Item 1, I'm not ready to make a serious judgment about the stock. This section also helps me decide whether this is a business I even want to spend more time on.
5. Related Party Transactions (Item 13)
Item 13 is dry but important. It's where the company discloses transactions with insiders: executives, board members, or their related entities.
Most of the time, there's nothing dramatic here. Occasionally, it's where you find the seeds of a board-level blow-up.
I watch for:
- The company leasing property from an entity controlled by an executive or director.
- "Consulting" or service arrangements where insiders' firms get paid.
- Loans, guarantees, or unusual compensation arrangements.
- The size of these transactions relative to company size.
Not every related party transaction is bad. But undisclosed or unusual ones have been at the center of many accounting scandals. When this section feels long, complex, or vaguely worded, I spend more time here.
Reading a 10-K Efficiently
You don't need to block out a full day for every 10-K. Here's my pattern:
Pass 1: Fast Scan (15-20 Minutes)
- Open the latest 10-K and the prior year's 10-K side by side.
- Skim Risk Factors looking for newly added or heavily expanded risks.
- Read the MD&A overview.
- Jump to the cash flow statement and see whether operating cash flow is positive and roughly tracks net income.
If nothing seems worrying, I've avoided spending an hour on a company that doesn't deserve it.
Pass 2: Close Read (60-90 Minutes)
For companies I actually care about:
- Read Item 1 Business carefully until I can explain the model in my own words.
- Work through MD&A in full, including segment discussions.
- Study the three financial statements and key footnotes.
- Revisit Risk Factors more slowly.
- Check Item 13 Related Party Transactions and Item 9A Controls.
This level of work is overkill for a watchlist of fifty names, but it's reasonable for actual positions.
Common 10-K Red Flags
These patterns consistently deserve extra attention:
Auditor changes or disputes (Item 9, related 8-Ks). Often tied to disagreements over accounting.
"Material weakness" in controls (Item 9A). Signals problems in how financial data is produced.
"Substantial doubt" about going concern (Auditor's opinion). The auditor is questioning the company's ability to survive 12 months.
Restated financials (Notes in Item 8). Prior numbers were incorrect. Can be serious.
Heavy or unusual related party dealings (Item 13). Conflicts of interest and potential self-dealing.
New, specific risk factors (Item 1A). Fresh legal, regulatory, or financial risks.
Rising earnings, falling cash flow. Earnings quality questions and aggressive accounting risk.
Receivables growing faster than revenue. Customers may not be paying on time.
Large goodwill relative to equity. Overpayment for acquisitions, potential impairments.
No single item is fatal by itself. Clusters of them are what should make you cautious.
10-K Deadlines
10-K due dates depend on company size (by public float):
| Filer Type | Public Float | 10-K Deadline |
|---|---|---|
| Large Accelerated Filer | $700M+ | 60 days after fiscal year end |
| Accelerated Filer | $75M-$700M | 75 days |
| Non-Accelerated Filer | Under $75M | 90 days |
Most well-known large caps are Large Accelerated Filers. If they use a December year-end, their 10-K typically shows up in late February.
Knowing the deadline helps you plan your review calendar. Late filings can themselves be a warning sign.
How to Find 10-Ks
Three main options:
SEC EDGAR is the authoritative repository. Every 10-K is there. The downside: the interface is clunky.
Earnings Feed sits on top of EDGAR but focuses on real-time tracking and usability. A live feed that shows new 10-Ks as they file, company profiles that aggregate all filings in one place, filtering by form type, exchange, or industry.
Company IR sites usually post their 10-Ks in an "SEC Filings" section. Convenient for a single company, less useful if you're tracking dozens.
Practice: Your First 10-K
The only way to get comfortable with 10-Ks is repetition.
Pick a business you know from everyday life. Maybe a retailer you shop at, a tech platform you use, or a brand you see everywhere. Then:
- Go to the Earnings Feed 10-K hub and pull up the latest 10-K for that company.
- Read Item 1 Business until you can explain the model to someone else.
- Read the MD&A overview and note the main drivers of the year.
- Scan Risk Factors for anything surprising or newly added.
- Check the cash flow statement. Are they turning accounting profits into cash?
- Write down three things you learned that you did not know from headlines.
Good starter names tend to be clear, consumer-facing businesses with understandable models.
Start Reading 10-Ks
The 10-K is where the real story of a public company lives. Dense, but the one document where management, lawyers, auditors, and regulators all meet. That makes it uniquely valuable.
To recap:
- Focus on Risk Factors, MD&A, the financials, the Business section, and related party disclosures.
- Compare the current 10-K to prior years. Changes in language often tell you more than raw numbers.
- Use the cash flow statement and footnotes to test whether earnings are high quality.
- Watch for clusters of red flags.
If you want to build the habit of actually reading 10-Ks when they file:
- Create a free watchlist on Earnings Feed and get 10-Ks for your names the moment they hit EDGAR.
- Browse all recent 10-Ks to see how different companies tell their story.
- Explore 10-Qs for quarter-to-quarter updates and Form 4 filings in the insider feed to see what executives are doing with their own shares.
The filings are free. The edge comes from actually reading them.