A 10-K can run to two hundred pages. Nobody needs to read it front to back, and the first page is not the best place to start. This guide suggests an order, says what to look for in each part, and lists the questions worth bringing. It assumes you have the company's latest 10-K open, either on Listed's filing page or on sec.gov.

Before you open it

Have three things beside you:

Last year's 10-K. Much of what matters in a 10-K is what changed since the last one. A risk factor that is new, a customer that is no longer named, a sentence in MD&A that got shorter.
The financial summary. Listed's company page shows revenue, margins, net income, cash flow and the balance sheet for five fiscal years and eight quarters. Knowing the shape of the numbers first tells you which parts of the text to read closely.
A list of questions. "Why did gross margin fall two points?" is a better guide through a 10-K than "is this a good company?".

Start with Item 7: MD&A

Management's Discussion and Analysis of Financial Condition and Results of Operations is the company explaining its own numbers. Read it first because it tells you what management thinks mattered this year.

What to look for:

The explanation of each change. When revenue grew, was it more units, higher prices, an acquisition, or currency? Companies are required to explain material changes, and the way they split them up is revealing.
Segments. The total can hide a growing business carrying a shrinking one. MD&A usually discusses results by segment.
Liquidity and capital resources. Where the company's cash comes from, what it plans to spend, and what it owes. This section often states how long the company expects its cash to last.
Critical accounting estimates. The judgements that most affect the numbers: how revenue is recognized on long contracts, how goodwill is tested, how reserves are set. A change in one of these can move profit without any change in the business.
What is not said. If a topic was discussed at length last year and is missing this year, ask why.

MD&A is written by management. Treat it as their account, and check it against the statements.

Then Item 8: the financial statements

Item 8, Financial Statements and Supplementary Data, holds the audited statements: the income statement, the balance sheet, the cash flow statement, the statement of shareholders' equity, and the notes. The figures on Listed come from this item's XBRL data.

Start with the auditor's report, at the beginning of Item 8.

Its opinion should be "unqualified": the statements present fairly, in all material respects. Anything else is rare and serious.
A paragraph about going concern means the auditor has substantial doubt that the company can continue for the next year.
Critical audit matters are the areas the auditor found most difficult. They point to the riskiest judgements in the numbers.

Then read the statements against each other:

Does operating cash flow roughly track net income over several years? A persistent gap needs an explanation.
Are receivables or inventory growing faster than revenue?
How much of the cash is cash and equivalents, and how much sits in short-term investments?

Then the notes. You do not need all of them. These usually repay the time:

Revenue recognition: when the company counts a sale, and how much of its revenue is from contracts it has not yet delivered.
Segments: revenue and profit by business line and region.
Debt: what is owed, at what rates, and when each piece is due. A large maturity in the next two years is worth knowing about.
Leases: obligations that often do not appear in total debt.
Stock-based compensation: how much of the company's pay is in shares, and how much dilution it creates.
Commitments and contingencies: purchase obligations, guarantees and lawsuits.
Subsequent events: what happened between the year end and the filing.

Then Item 1A: risk factors

Risk factors are long, and much of the text is defensive: a list of everything that could conceivably go wrong. Reading them all from the top is the least efficient way through.

Instead, compare them with last year's. New risk factors, and existing ones that were rewritten or moved up the list, are the signal. Listed extracts this section, so you can read it on its own and set it beside the previous year's.

Then Item 1: business

Item 1 describes what the company does, how it makes money, who its customers and competitors are, how it is regulated, and how many people it employs. Read it once in full for a company you do not know. For one you follow, skim it for changes: new products, new segments, a major customer that is no longer named, a change in headcount.

The other items worth a few minutes

Item 1C, Cybersecurity: how the company manages cyber risk and who oversees it.
Item 3, Legal Proceedings: material lawsuits. The notes often have more detail.
Item 5, Market for the company's equity: dividends, and a table of share buybacks in the last quarter of the year.
Item 7A, Quantitative and Qualitative Disclosures About Market Risk: how exposed the company is to interest rates, currencies and commodity prices, often with the effect of a stated move. For a company with floating-rate debt or large foreign sales, this matters.
Item 9A, Controls and Procedures: whether management and the auditor concluded that internal control over financial reporting is effective. A material weakness here means a reasonable chance that a material error would not be caught. It often comes before or with a restatement.
Item 9B, Other Information: among other things, directors and officers who adopted or ended a Rule 10b5-1 plan in the last quarter.
Part III, Items 10 to 14: directors, executive pay, ownership and the auditor's fees. These are usually incorporated by reference from the proxy statement, the DEF 14A, filed a few weeks later.

The exhibits

Item 15 lists the exhibits. A few are worth knowing: the list of subsidiaries (Exhibit 21), the auditor's consent (Exhibit 23), the officers' certifications (Exhibits 31 and 32), material contracts such as credit agreements and executive employment agreements (Exhibit 10), and the company's clawback policy (Exhibit 97).

Questions to bring

What does this company sell, to whom, and how does it get paid?
What changed since last year, in the numbers and in the words?
Where does the cash come from, and where does it go?
What does the company owe, and when?
Which judgements could move the numbers most?
What would have to be true for the risks that are new this year to matter?

None of these questions has a right answer you can look up. The 10-K gives you the material to form your own view.

How Listed helps

Each figure on a company page carries a note with its XBRL concept, its period and the accession number of the filing it came from, so you can go from a number to the line in the 10-K that states it. The filing page for a 10-K lists its documents and the sections Listed extracts (Business, Risk Factors, MD&A, Legal Proceedings, and Controls), each linked to the original. Where a figure is missing, the page says "not reported", and the glossary entry explains why that happens.

For the quarterly reports in between, see how to read a 10-Q.

How to read a 10-K