Other Comprehensive Income, OCI, AOCI: The Basics, with 10-K Examples
Edited for clarity: 9/21/22 As a company creates income, this changes its shareholder’s equity. Add investment securities and it can get hairy. The Statement of Comprehensive Income attempts to capture the effect of unrealized gains on investment securities. It reports these changes to shareholder’s equity through the balance sheet, through OCI and AOCI. OCI stands […]
(NOL) Net Operating Loss Carryforward Explained: Losses Become Assets
In contrast to deferred tax liabilities, a net operating loss (NOL) carryforward is a number that can be used to offset future Net Income, which creates a deferred tax asset on a balance sheet that represents a future tax deduction. The deferred tax asset created from a net operating loss carryforward is a metric now […]
Basic Cash Flow Statement Breakdown (by Each Component)
Updated 5/1/2024 Cash is king, and finding companies that generate cash from their activities is the holy grail of investing. The basic cash flow statement provides answers to the question: Does this company generate free cash flow? Today, we will dive into the basic cash flow statement in our ongoing series of learning basic accounting […]
Explaining Management Discussion and Analysis (MD&A); 10-k Overview
The Management Discussion and Analysis, or MD&A, portion of the 10-k is the meat and potatoes of a company’s annual report and one of the best ways to track a company’s recent progress. While the contents of this section may vary, the Management Discussion and Analysis is great for getting specific insight into an industry […]
Deferred Income Tax Liabilities Explained (Real-Life Example in a 10-k)
Deferred income taxes in a company’s consolidated balance sheet and cash flow statement is an easy concept in principle, but when deferred income tax liabilities (or assets) change from year to year, that’s where it can get more confusing. The reason for deferred income tax liabilities and assets in the first place is because of […]
GAAP Accounting Rules: The 4 Basic Principles Investors Should Know
Most think of Accounting as this dry profession we only need to consider around tax time, but as an investor, understanding how accounting works on a basic level remains important if you want to analyze businesses on any level. GAAP accounting rules remain the primary force behind financial accounting, and today we will learn more […]
Unqualified vs Qualified Audit Opinion: Auditor Report in the 10-k Explained
Accounting scandals can be a death knell to investors of a public company. There’s various ways to sniff out accounting “shenanigans”, but one of the easiest ways is to scan the auditor’s report of the 10-k. Essentially, you want to determine whether there’s a qualified or unqualified audit opinion, by looking for a few keywords. […]
Accounting for Operating Leases in the Balance Sheet – Simply Explained
Updated 9/25/2023 Operating lease accounting can be confusing. Especially when you have to sift through multiple financial statements to quantify its impact. The latest FASB (ASU 2016-02) rule has now made operating leases more transparent. It has required its inclusion in the balance sheet. In this post, we will cover [Click to Skip Ahead]: But […]
Capital Expenditures Explained
Capital investment, also referred to as capital expenditures or CapEx for short, is the spending necessary for a company to maintain and grow its operations. As an investor, responsible CapEx is extra important for shareholders to keep an eye on in order to analyze if the company is earning an appropriate return on invested capital […]
What is a Form 8-K? The Beginner Investor’s Guide
Have you ever seen a form 8-K? Chances are, the answer is no, unless you have been investing for a little while and paying close attention to a specific stock(s). You’ve likely heard of a 10-K and a 10-Q before, which are much more common and more important to you as an investor, but that’s […]
