Financial statements are reports that publicly-traded companies are legally required to file by the Securities and Exchange Commission (SEC). In order to be traded on a stock exchange, companies need to reveal a surprising amount about their financial situation, to say nothing of their strategies, risks and concerns.
A 10-K is an annual report; a 10-Q is a quarterly report. The 10-K is usually a lot more detailed. In general, the report will tell you what the company does, how it is performing, and any risks or liabilities that management knows about.
Everybody’s financial report is different, but some parts are consistent and required. For example, there is a section containing Selected Financial Data, which usually contains the balance sheet (Assets, Liabilities and Equity), Income Statement (money the business made versus money the business spent) and the Statement of Cash Flows (the actual cash held by the company, as opposed to money it might have earned but not yet received).
There’s a lot of terminology that is very specific to financial statements, and sometimes things are called by more than one name–an Income Statement can also be called a Profit and Loss Statement, Operating Statement or Earnings Statement, for example.
The financial statement must present certain information, but there are ways to obfuscate things to present a rosier picture than might actually be the case. For example, a company might note on its statements that it expects a large number of people to retire in 3 years and start to exercise pension benefits, which will generate a very high cost in the future. It might also give enough information to indicate that it expects cash flows to continue to decline by a certain percentage over the next few years. If you put those two pieces of information together, you might determine that the company is likely to run itself out of cash in three years if it doesn’t do something drastic.
It follows that situations like Enron ought not really to have happened because of the amount of information that is publicly available–somewhere, somebody smart ought to have looked at the numbers and gotten to the truth. The fact that that did not happen is a testament both to how complex these statements can be, and to how complex human and political factors can be when you’re presenting controversial conclusions. Again, people are messy.