When evaluating a company's financial performance, investors and analysts often use profitability ratios to assess how efficiently a company is generating returns from its resources. Three widely used metrics are Return on Equity (ROE), Return on Assets (ROA), and Return on Investment (ROI). Each of these ratios offers insight into different aspects of a company’s profitability, helping investors understand how effectively a company is using its equity, assets, and investments.
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Essential Company Information for Investors
Numerous websites provide essential information about companies, such as financial statements, ratios, and charts. I recommend using these websites to search for promising investment ideas because they offer advanced and user-friendly search capabilities and data visualization. However, once you've identified a company of interest, it's prudent to verify the data accuracy through official sources. For U.S. stocks, for example, you can visit the SEC's EDGAR search tool. I've often found discrepancies in the numbers presented on other websites.
Additionally, consider analyzing the company's own website, which typically has a section dedicated to investors. For instance, Apple provides such information.
Below is a summary of the documents published by U.S. stock companies and the information they contain
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10-K:
- What It Is: An annual report that offers a comprehensive overview of the company's financial health.
- Contents: Includes detailed financial statements, management's discussion and analysis (MD&A), a description of the business model, market information, legal risk factors, and other significant data.
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10-Q:
- What It Is: A quarterly report of the company.
- Contents: Similar to 10-K but less detailed, it includes updated financial statements and provides insights into performance and financial health throughout the fiscal year.
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8-K:
- What It Is: A current report companies use to announce significant events important to shareholders.
- Contents: Can include financial results, leadership changes, mergers and acquisitions, bankruptcy, changes in accounting policies, and other significant events.
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Proxy Statement (DEF 14A):
- What It Is: A report from the company's board to shareholders before the annual meeting.
- Contents: Information on board nominations, shareholder proposals, executive compensation, and other corporate matters.
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Form 4:
- What It Is: A report on the buying and selling of company stock by insiders (executives, board of directors).
- Contents: Contains insider transactions, which can be an indicator of the management's confidence in the company's future.
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20-F:
- What It Is: An annual report for foreign companies traded on U.S. exchanges.
- Contents: Similar to 10-K but for non-U.S. companies.
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S-1:
- What It Is: Registration for a new issuance of shares, usually associated with an IPO (Initial Public Offering).
- Contents: Detailed information about the company, its finances, management, investment risks, use of IPO proceeds, and other relevant details.
Conclusion
When conducting due diligence, it's vital to consult a variety of sources for a well-rounded view of potential investments. Official documents like the ones listed above provide the most reliable information and should form the foundation of your research. Always remember to cross-reference data and keep up-to-date with the latest filings to make the most informed investment decisions.
The article was written by Michal.
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