• The Daily Technical
  • Posts
  • The Daily Technical #65: If you had to pick between either the income statement or cash flow statement to analyze a company, which would you pick (and why)?

The Daily Technical #65: If you had to pick between either the income statement or cash flow statement to analyze a company, which would you pick (and why)?

How to answer "What are the main sections of a 10-K?"

December 10, 2024

Good morning. Welcome to the 65th edition of The Daily Technical.

We’re excited to announce the launch of our official partnership with Headstart Careers! Learn what that means for you here.

Without further ado, let’s dive in.

First time reading? Sign up here.

OVERVIEW OF YESTERDAY’S QUESTION
What are the main sections of a 10-K?

In a 10-K, you'll find the three core financial statements, which are the income statement, cash flow statement, and balance sheet. There'll also be a statement of shareholders’ equity, a statement of comprehensive income, and supplementary data and disclosures to accompany the financials.

Main Sections of a 10-K

Business Overview: Overview of the company’s business divisions, strategy, product or service offerings, seasonality, geographical footprint, and key risks.

Management’s Discussion & Analysis ("MD&A"): Commentary and summarized analysis of the company’s fiscal year result from the perspective of the management team.

Financial Statements: The “Core 3”: Income Statement, Balance Sheet, Cash Flow Statement The “Other 2”: Statement of Comprehensive Income, Statement of Shareholders’ Equity.

Notes: Supplementary disclosures to the financial statements that provide more details about a company’s recent financial performance.

Common Mistakes

  1. Skipping the Business Overview, thinking it's less critical than financials. This section outlines what the company does, its strategy, and key risks—essential for understanding their operations.

  2. Overlooking the Notes to Financial Statements. They contain crucial details and clarifications that illuminate financial statements’ numbers.

  3. Grouping all financial statements without discerning their distinct functions. Know what each statement—income, cash flow, balance sheet, comprehensive income, and shareholders’ equity—uniquely offers to paint a complete financial picture.

TL;DR

  • Business Overview: Covers divisions, strategy, offerings, seasonality, geographical reach, and risks.

  • Management’s Discussion & Analysis (MD&A): Management's analysis and summary of the fiscal year's performance.

  • Financial Statements: Include Income Statement, Balance Sheet, Cash Flow Statement, Statement of Comprehensive Income, and Statement of Shareholders’ Equity.

  • Notes: Detailed disclosures on financial performance and supplementary data.

TODAY’S QUESTION
If you had to pick between either the income statement or cash flow statement to analyze a company, which would you pick (and why)?

Type your answer here. Within 60 seconds you’ll have custom feedback in your inbox.

THAT’S A WRAP
Before You Go: Are you signed up for HirePrep’s beta?

Gain access to the HirePrep platform by clicking the link below. Our beta will run until mid January (official launch date to be released soon).

The button takes you to our Skool community where you’ll find instructions for getting setup on the platform. Join using access code “DAILYTECHNICAL”

See you tomorrow,

Mike Lukasevicz
Founder @ HirePrep