I Love Financial Reports

America -- we love her for many reasons, such as the majesty of purple mountains, the Bill of Rights, and Krispy Kreme Donuts (the donuts, and not necessarily the stock). Here's another reason to love America: our nation, compared to most others, requires a lot from publicly traded companies. Recent scandals not withstanding, we investors have a fighting chance of really getting to know the companies in which we invest, thanks to the reports companies are required to file.

Permit me to review them for you. Once a year, companies file "10-K" reports, which tend to be rather long and detailed. They include at least the following three financial reports:

They also include management's discussion of progress and risks faced, plus lots of other numbers, such as breakouts of sales and earnings by regions and other categories. There are also plenty of footnotes, offering, for example, the interest rates tied to various debts owed.

Meanwhile, in the three intervening quarters between 10-Ks, companies file shorter 10-Q reports, which don't always include all three main financial statements. These reports are generally not audited, either, but they still offer useful information.

Examples
Just as an example of what you can find in a 10-K, check out some of these risks disclosed for various companies:

  • Yahoo! (Nasdaq: YHOO  ) : "The majority of our revenues are derived from marketing services, and the reduction in spending by or loss of current or potential advertisers would cause our revenues and operating results to decline." And "In certain markets, we depend on a limited number of sources to direct a significant percentage of users and businesses to our service to conduct searches and a loss of any of these sources could harm our operating results." These probably constitute news to some investors and are useful reminders for others.
  • Sirius Satellite (Nasdaq: SIRI  ) : "Our three satellites were launched in 2000. We do not maintain in-orbit insurance policies covering our satellites. Our operating results would be materially adversely affected if the useful life of our satellites is significantly shorter than we expect."
  • Qualcomm (Nasdaq: QCOM  ) : "Our three largest customers [LG Electronics, Motorola (NYSE: MOT  ) , and Samsung] accounted for 39%, 39%, and 40% of consolidated revenues in fiscal 2006, 2005 and 2004, respectively. The loss of any one of our major customers or any reduction in the demand for devices utilizing our CDMA technology could reduce our revenues and harm our ability to achieve or sustain desired levels of operating results."

So let's all be grateful for financial reports and the element of transparency that they bring.

For related Foolishness:

Yahoo is a Motley Fool Stock Advisor selection.

What's sending Fools' hearts aflutter? Go back to our intro page to see what else we have a crush on.

Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article.


Read/Post Comments (0) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 521746, ~/Articles/ArticleHandler.aspx, 11/23/2014 6:04:27 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement