Item 1 - The Business
Companies typically define their business in this opening section of the 10-K report. They describe their various product lines and business segments. They list contracts, raw materials used, and supplier or distribution channels. They talk about the competition and competitive factors in the market. If R&D or intellectual property issues are important to company operations, they are included. Finally, a section (1A) is devoted to outlining risk factors to consider in evaluating the company's business.
Item 7 - The MD&A
You can find a narrative explanation of a company’s financial performance in the section of the quarterly or annual report entitled, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” MD&A is management’s opportunity to provide investors with its view of the financial performance and condition of the company. It’s management’s opportunity to tell investors what the financial statements show and do not show, as well as point out important trends and risks that could have an impact on the company’s future.
The SEC’s rules governing MD&A require disclosure about trends, events or uncertainties known to management that would have a material impact on reported financial information. The purpose of MD&A is to provide investors with information that the company’s management believes to be necessary to an understanding of its financial condition, changes in financial condition and results of operations. It is intended to help investors to see the company through the eyes of management. It is also intended to provide context for the financial statements and information about the company’s earnings and cash flows. (From the SEC. Beginners' Guide to Financial Statements). Financial risk factors are identified in section 7A of the MD&A.