With virtual universal access to the Internet, there are no excuses for investors in the stock market to complain that they did not know about a particular company's problems before they invested.
Detailed financial information is at your fingertips through a number of websites that provide this information. The websites even calculate all of the common ratios and other indicators that investors in the stock market need to understand the company's financial health.
You do not have to be a financial analyst to figure most of this stuff out. The better sites even explain many of the ratios and key indicators and give you some guidance as to their meaning.
Two of the best are Morningstar.com and Yahoo's financial section.
Both of these websites offer detailed and comprehensive financial information on almost all publicly traded companies.
These aren't the only websites that offer this information, but there are two that I turn to a regular basis.
However, if you want to dig even deeper there are two reports that are online and available for free to all investors and stock market.
The first is the 10-K report and its smaller cousin the 10-Q report.
Both of these documents are legally required by the SEC and can be found on its website. The 10-K report is filed annually and is the regulatory equivalent of the glossy annual report companies produce for investors and stockholders.
Unlike the glossy annual report, the 10-K also includes detailed financial information on the company and other important, but not necessarily financial information.
However unlike the information found on the Internet, the 10-K digs deeper into important matters that don't show up on financial reports. These include legal actions against the company, regulatory changes that could affect the company's business and other important information that is not normally found in strictly financial documents.
The downside of the 10-K is that if you want ratios and indicators from the financial reports, you pretty much have to do that on your own. Since many of these ratios are a calculated for you on the public Internet sites such as Morningstar and Yahoo that really shouldn't be a problem.
The SEC
The 10-Q is a smaller version of the 10K and is filed at the end of each quarter. Obviously the information of the 10-Q is more current then the information of the 10K. However it is also subject to revisions. So if you look for the 10-Q report online through the SEC website, be sure to note whether there is an amended version that may change some of the details in the report.
Many companies also post their 10K and 10-Q reports on the company website often under a section called investor relations or something similar.
Companies must file Form 10-K within 90 days of the end of their fiscal year with the SEC. It contains detailed information on the company, its history, risks and a three-year financial history.
The primary source for this information is the SEC and its EDGAR database. All the information is there and it is free.
The downside is it is not the most user-friendly site. Once you figure it out (they have a tutorial), the process of searching for a specific company and these forms is relatively simple.
There are several subscription-base sites such as Edgar Online.com, which offer up the same information in easier to use formats and nicer packages. Some of the services will alert you when companies you follow file other forms.
Forget the Annual Report
If you want to get to know a company, skip the annual report and read the 10-K instead. There are no flowery letters from the chairman or glossy pictures of happy workers - just plenty of information that is required by law.
Companies and officers can and do get in serious trouble for falsifying these reports. The SEC takes its mission to protect the investor seriously.
The next time a company catches your eye as a possible investment candidate, go over their last 10-K and most recent 10-Q carefully. You'll have a good picture of what the company and it management are about as your reward.
