10k of a company || Interview question
Can you please tell me how to answer the following question -
When looking at a 10 k to analyze a company what should you look at first?
Is the appropriate answer cash flow statement?
This is an interview question, how would i go about answering this.
Please help. this is urgent.
I would either go with the first several pages where management discusses their business, its operations, its risk factors, its competition, etc. or the management discussion and analysis where management discuss the business's financial health and results of operations. I would not consider using the cash flow statement as your answer incorrect, but it is not really original, which is what this question is trying to get at.
Makes sense. SO, how do i tie cash flow statements into this then?
Generally speaking, I would follow Sil's guidance. If the interview/role is more technical in nature, you need to look at all 3 financial statements for a thorough analysis to understand the health of the company. Does the business have good margins and have they shown earnings growth? How's the strength of the balance sheet? How do they put their cash to use? Dividends? Buybacks? M&A? retained? Just to name a few.
id ask my boss why he was late on the capiq payment
I think the appropriate follow up to that question is: "What exactly are we trying to solve here? What's the scope?"
The 10-K can be useful for a variety of situations. While you may sound intelligent speaking to the components of the 10-K when you start running your mouth about everything under the sun that's part of the 10-K, you would most likely impress the interviewer more if you were able to narrow the objective/scope of the question/purpose, and then follow up with the more tailored answer to the interviewer's question. This is my 2c coming from ER and then moving to corp strat role.
I couldn't agree more. If the purpose is to learn about the business and management's strategy, I'd rather read a few earnings transcripts, which are much more forward looking (and needless to say, much less boring than reading a 10-K).
Now, a friend of mine was recently asked a similar question (he was applying for a Treasurer role): if you could only choose one of the three financial statements, which one would you pick?
He chose the cash flow statement, as you can indirectly get a sense of the income statement, balance sheet, and capital allocation policy by looking at cash flows.
Is this for an entry-level job? Finance or accounting?
My personal opinion is to look at a 10k to learn more about the company in general. For instance, how many business units does the company have? What size is each business unit? What are the top products in each business unit? What product is the company most known for? What products are most profitable? At what rate is the company and business units expanding/contracting? any recent acquisitions?
Unless this is an accounting job, I don't think you need to dive into crazy detail about SG&A costs, how many shares outstanding the company has, how much they pay in taxes, whatever. In preparing for an interview you need to show interest in the company and show that you did some basic research and know that you actually want the job. Listen to the latest earnings call, read some recent news about the company. No need to go crazy and memorize numbers.
10K investment question (Originally Posted: 04/09/2008)
if you were asked in an interview to look at a 10k and figure out whether to invest or not, how would you go about doing this? what are the specific key factors you would look for?
thanks
Well you should first read the part at the beginning about the company to get an idea of what they do. Also try to get a feel of the industry they're in.
Besides the financial statements, the most important part will probably me the Management Discussion and Analysis. This is basically a note from the company analyzing its performance and future prospects.
You'd also want to look at the Risks section. There is a lot of insubstantial boilerplate stuff in there, but occasionally you will uncover something of note.
anyone else? more specifically, what type of general metrics would one look at in analyzing the financial statements, when you have only like an hour or two to do this? i'm just wondering where people's minds go first, when they are approached with this question in an interview
anyone?
Free Cash Flow and EBITDA multiples is usually what I check out first. Past growth, future growth prospects. ROI and ROE. How do they compare to their competitors. Is management credible, look at what management has given for guidance in the past and what they were actually able to do. Do they have some sort of "moat" (competitive advantage). Who the key shareholders are.
but all of this has def been helpful
like for instance: one random thing i look at is cash conversion cycle, especially if it's like ecommerce, etc, to see how quickly the company is actually moving inventory, etc
any other tips like this, even per industry?
Quick and dirty:
Cash flow EBITDA growth EBITDA multiple as compared to other public comps ROIC - return on invested capital P/E as compared to other public comps
this is the best post on the site (that i've seen) related to 10-k's https://www.wallstreetoasis.com/forums/anatomy-of-the-10-k
one of the best posts to the site in general.
Yep, that was a good post
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