Learning the Lingo

By Kelly Carr
May 28, 2008 06:22 PM

The lingo, which seems like a complex encrypted code, hits your brain from all sides. Your head is spinning, suddenly your stomach is rumbling and before you know it, panic ensues. “Read the 10-K, the 10-Q, pay attention to the footnotes and make sure you are clear on P and L.”

Trying to remain clam, you stare blankly at your editor and nod. What exactly do these terms even mean? 10-K, hmm… never heard of it. Assignment in hand and a 5 p.m. deadline approaching, you think to yourself -- I am doomed. I will never be able to write this story. My career as a business reporter is over before it even began.

As a newbie on the business beat, you may be afraid to ask questions that seem obvious to everyone else. But the fact is, most business journalists you idolize started out in the same position. Even veteran business journalists, the ones whose stories on complex investigations have garnered Pulitzer Prizes, have felt the fear at some point in their careers.

Alec Klein, for example, recounts a story about when he first started as a reporter for The Wall Street Journal and was assigned to write an earnings story. After the conference call, he asked around, curious about what exactly P and L stood for. A source was amazed that as a reporter for The Journal, Klein didn’t know the abbreviated terms for profit and loss.

Although that’s where he began, Klein is now a well-decorated veteran business journalist for The Washington Post. In fact, his hunger to educate himself and ask questions that may seem obvious eventually led him to a story that uncovered how America Online quietly beefed up its advertising revenue before merging with Time Warner.

So in the sprit of reducing anxiety for new business reporters in newsrooms across the nation, here is some insight into the topics you’ve been afraid to ask about.  Before you know it, you’ll be recalling your own Klein-like stories.

• Understand the differences between the income statement, balance sheet and statement of cash flows. The income statement shows the revenues, expenses, and income (the difference between revenues and expenses) of a corporation over a specific period of time. A balance sheet, also called the statement of financial condition, is a summary of a company’s assets, liabilities and the owner’s equity. The statement of cash flows is a financial statement that reports the flow of cash in and out of a company for a set period, usually one year. It reports the operating, investing and financing activities of the company.
• Get to know the SEC (Securities and Exchange Commission), which is a federal agency that regulates the U.S. financial markets. The SEC also oversees the securities industry and promotes full disclosure in order to protect the investing public against malpractice in the securities markets.
• Once you know about the SEC, dive into EDGAR (Electronic Data Gathering and Retrieval). The SEC uses EDGAR to transmit company documents such as 10-Ks, 10-Qs, quarterly reports and other SEC filings to investors. Once you get to the site you can take a tutorial on how to locate specific documents.
• Now, what about all those numbered financial statements? There are a few you must know including the 10-Q, 10-K and 8-K. According to the SEC, the 10-Q includes unaudited financial statements and provides a continuing view of the company's financial position during the year. It is a quarterly earnings release. The 10-K is an annual report that must be filed within 90 days after the end of the company’s fiscal year. It gives a comprehensive overview of the company's business and financial condition and includes audited financial statements. The 8-K is the report companies file with the SEC to announce major events shareholders should know about.
• Still stuck?  Visit our “Business Glossary” or visit the SEC’s Web site which offers a detailed explanation about specific financial statements and the corresponding release dates.

* Definitions for key terms are from the Securities and Exchange Commission and Campbell R. Harvey’s book “Dictionary of Money and Investing.”

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Copyright © 2008 Donald W. Reynolds National Center for Business Journalism