The Daily Technical #131: What does accounts receivables turnover measure?

Good afternoon. Welcome to the 131st edition of The Daily Technical.

Now, you’re here for one reason, so let’s dive in.

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OVERVIEW OF YESTERDAY’S QUESTION
What is the difference between the 10-K and 10-Q?

10-K: 

A 10-K is the annual report required to be filed with the SEC for any public company in the U.S.

The report is comprehensive and includes a full overview of the business operations, commentary on recent performance by management, risk factors, disclosures on changes in accounting policies – and most importantly, the three core financial statements with supplementary data.

10-Q:

A 10-Q refers to the quarterly report required to be filed with the SEC.

Compared to the 10-K, this report is far more condensed in length and depth, with the focus being on the quarterly financials with brief sections for MD&A and supplementary disclosures.

Additional Differences: 

A few more differences are 10-Ks are required to be audited by an independent accounting firm, but 10-Qs are only reviewed by CPAs and left unaudited.

10-Ks must also be filed ~60-90 days after the fiscal year ends, whereas 10-Qs must be submitted ~40-45 days after the quarter ends.

Common Mistakes

1. Incorrectly stating that both reports require auditing. The 10-K must be audited, while the 10-Q is only reviewed. Remember the distinction: 10-K is audited, 10-Q is reviewed by CPAs.

2. Confusing the specific filing deadlines. The 10-K is due 60-90 days post-fiscal year, and the 10-Q is due 40-45 days post-quarter. Accurately note these timelines to demonstrate a complete understanding of reporting obligations.

3. Failing to mention the emergence of supplementary data and disclosures. While 10-Ks provide extensive supplementary data, 10-Qs include it briefly. Highlighting these differences underscores your acute attention to detail.
   

TL;DR

• Purpose: 10-K is an annual comprehensive report; 10-Q is quarterly and concise.

• Content: 10-K includes detailed operations, performance, risks, and audited financials. 10-Q focuses on quarterly financials and brief analyses.

• Audit Requirement: 10-K is audited; 10-Q is reviewed but unaudited.

• Filing Deadlines: 10-K is filed 60-90 days after fiscal year-end; 10-Q, 40-45 days post-quarter-end.

• Approach: Highlight thoroughness for 10-K and conciseness for 10-Q when explaining.

TODAY’S QUESTION
What does accounts receivables turnover measure?

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THAT’S A WRAP
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