Before you start
What is a BDC? Follow the fund, the borrowers and the shareholder, From origination to repayment: how a BDC investment earns and loses money, Internal and external BDC management: follow the expense contract
- Locate each analytical input in a filing rather than infer it from a slide.
- Keep flow periods, balance-sheet dates and share bases separate.
- Record unknowns, revisions and source locations reproducibly.
Define the document before extracting a number
Record the registrant, accession, form, filing date and reporting period. A fiscal quarter may not match a calendar quarter, and a year-to-date statement covers a different interval from a standalone quarter. A filed earnings exhibit can provide a useful table without replacing the complete financial statements and notes. A later amendment is a separate document to investigate, not permission to overwrite an earlier value silently. The SEC's guide explains how management discussion, financial statements and exhibits fit together; use the current filing's table of contents because form requirements and presentation can change.
Give every statement a distinct question
Use the statement of assets and liabilities to establish the measurement-date balance sheet. Use the statement of operations to locate income, expenses, realized results and valuation changes for a period. Use changes in net assets to connect operations, shareholder distributions and capital transactions. Use cash flows to identify where cash actually moved. A positive operating cash-flow total in an investment company may include investment purchases and repayments under its presentation, so it is not automatically a recurring dividend-funding measure. Read classifications and notes rather than importing an industrial-company free-cash-flow formula without checking its meaning.
The investment schedule supplies the credit map
The schedule of investments can identify issuer, instrument, stated terms, principal, cost and fair value, supported by footnotes. Its ranking and non-accrual symbols matter as much as the row total. Distinguish the legal borrower from a sponsor or broad industry label, and investigate multiple positions in the same business before claiming diversification. Commitments, PIK provisions and affiliated or controlled investments may require separate notes. Some desired details are not disclosed individually. Preserve that boundary instead of filling gaps with portfolio averages or treating an undisclosed exposure as an exact zero. Concentration includes shared borrower, industry and sponsor exposures, as well as correlated business risks. Ten positions exposed to the same economic shock are not automatically ten independent sources of repayment.
Build a source card before building a conclusion
For every input, retain source URL, accession, document location, amount or per-share basis, currency, scale, period and whether the value is reported or analytically derived. A derived value needs its formula and inputs. Record declared versus paid distributions and weighted-average versus period-end shares. Reconcile a sample of copied totals back to the filing before interpreting differences. An automated extraction or a successful spreadsheet formula is not independent verification. Mark an unresolved item as unknown, explain its impact on the conclusion, and name the next disclosure or clarification needed to resolve it.
Synthetic: the period label changes the comparison
A fictional filing reports nine-month NII of 90, of which 35 arose in the latest quarter. Annual common distributions are not disclosed. The latest quarter declares regular distributions of 25 and supplemental distributions of 5, for total declarations of 30. Matching the quarter gives total coverage of 35 / 30 = 1.1667×. Dividing the nine-month 90 by the quarter's 30 gives 3.0×, an invalid period comparison. The result is not fixed by calling both figures dollars: their time bases must also match.
Test your reasoning
If the quarter's supplemental distribution is undisclosed rather than confirmed at 5, can total coverage still be 1.1667×?
Reveal the worked answer
No. Regular coverage can be 35 / 25 = 1.4×, but total coverage is incomplete until the supplemental and special amounts are established.
A common mistake
Using a nine-month income total against one quarter's distribution, or substituting current shares for the disclosed earnings-per-share denominator.
What to check in the disclosures
- Capture form, accession, reporting period and filing date.
- Reconcile investment, income and net-asset totals.
- Retain footnotes explaining the investment schedule.
- Store unknown values separately from explicit zeros.
Check your understanding
Sources & scope
US BDC education. Examples are hypothetical unless expressly attributed. Filing dates, contractual definitions and tax rules matter. An issuer source describes that issuer; it is not evidence that every BDC uses the same policy.
- SEC: How to Read a 10-K — statements, notes and issuer responsibility ↗
- Ares Capital March 2026 results: statement and reconciliation format — not example data ↗
Educational material, not a recommendation or personalized investment advice. Source and correction policy.