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How to Read Financial Statements: Build Financial Literacy

Read financial statements and speak the language of business without the drudgery of a traditional accounting course.

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Last updated 9/2022 English

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Overview

"The number one problem in today's generation and economy is the lack of financial literacy" - Alan Greenspan,  Chairman of the U. S. Federal Reserve, 1987 to 2006 

If you are in business, you need to speak the language. No matter if you’re in sales, marketing, manufacturing, purchasing, accounting, or finance, you need to speak the language of business. Perhaps you own a small business or are an entrepreneur starting a business… or you need a better job and are thinking about going to business school… or you provide legal and consulting services to businesses. You’ll be more credible, make better decisions, and enjoy more success if you speak the language of business. 

The Importance of Financial Statements in Today’s World 

The language of business is encapsulated in financial statements. Financial statements provide a scorecard for how a business is doing. Over a series of years, it provides a map of the business’s performance. Managers judge the success of their business with financial statements. Investors make intelligent investing decisions with financial statements. In addition, people in the business world are being held more accountable for their financial statement practices since Enron and WorldCom. They need to know what goes into financial statements.

Learn to Read Financial Statements, Not Prepare Them.

Just as you don’t need to understand how to make a car in order to drive one, you don’t have to understand bookkeeping to read financial statements. I've prepared a course that eliminates the bookkeeping drudgery and concentrates on the end product of accounting, how to read financial statements, not how to prepare them.

Like climbing a spiral staircase, I will teach you how to read three real company’s financial statements (Whole Foods, Sherwin Williams, and Facebook), starting with the simple and progressing to the complex, interspersing the statements with key accounting terms and concepts to help you build expertise.

Sounds good? Here is exactly what we will cover: 

  1. Read Financial Statements: What is a balance sheet, income statement and statement of cash flows and how each is different.
  2. Quick Look: Read Financial Statements of Whole Foods. What are the major line items on Whole Foods’ balance sheet, income statement and statement of cash flows.
  3. Where the Numbers Come from: Accrual Accounting Basics. What are some basic accounting concepts, why we can’t measure profits with cash, and why we need a separate statement for income and cash flow.
  4. Deep Dive: Read Financial Statements of Sherwin Williams. What each line item means on Sherwin Williams’ balance sheet, income statement and statement of cash flows.
  5. Test What You Have Learned: Facebook Case Study. A 28-question quiz about Facebook’s balance sheet, income statement and statement of cash flows with feedback
  6. What the Financial Statements Tell You Through Ratios: How to interpret a company’s performance with four ratios: return on equity, profit margin, asset turnover, and financial leverage. How to compute these ratios for Sherwin Williams and dig into their annual report for insight. How to compare financial statements among four different industries (distribution, manufacturing, service, and financial service).

The course contains 20 three-to-eight-minute-videos each. A case study is provided for Facebook.

The course will take 100 minutes to view the videos and do the Facebook case.

Are you ready? Let's do this. 

Who this course is for
  1. Business students who want a big picture view of accounting by understanding the end product, financial statements, not how the end product is created through bookkeeping
  2. Managers who want to read and understand financial statements without learning bookkeeping
  3. Investors who want to read and understand annual reports and 10Ks
  4. Non-accounting/finance employees in companies who want to determine how their company is doing without taking an accounting course
Testimonials
  1. Clear and comprehensive instruction all the way through the units. Case study is great to test your knowledge and apply lessons learnt. Overall excellent course ~ E Lozano
  2. This is a good course for me. I am not an accounting professional but need more foundation on financial statements to assist in my role ~ R Schelin
  3. Highly recommend this course. The lectures are well put together and the instructor answers your questions very clearly ~ Alexander
  4. For a beginner like me, this course was very insightful, easy to follow and clear explanations & definitions ~ K Walters
  5. Enjoyed the flow and level of details. Company examples were great choice ~ Hana H
  6. Excellent course. Everything was explained chronologically and progressively to further build and cement understanding of the material. You can tell the instructor has been a professor for a very long time and understands how to structure a course for optimal information retention. I feel as if I have a much stronger grasp of corporate financial concepts ~ TiRyan J
  7. The course was amazing. I wanted to learn how to read financial statement because I want to start a business at a young age and this course taught me to to read financial statement. It makes sure that you're learning module after module ~ J Padillo
  8. I really enjoyed this course. The material was presented in a format that made it easy to understand and quite interesting. The instructor conveys the information in clear, concise language with great slides to improve the student's grasp of key elements. I would highly recommend this course for anyone that wants to get a fundamental understanding of financial statements, the components that make up the income statement, the cash flow statement and the balance sheet and how the various data relate to each other. Well worth the time and money invested ~ Russell V
  9. I have been pleasantly surprised by the course. I see great practical value in being able to read the 3 financial statements as well as dig deeper into the statements to understand the innerworkings and the relationships between numbers that tell how a company is doing. It was well worth the time, effort, and cost I paid ~ M Crouse
  10. By far THE BEST course on learning how to read and understand financial statements! The instructor makes it so easy to understand and follow! Easily the best course I’ve ever spent money on and it’s worth every penny! Thank you! ~ K Yap
  11. This course was a good primer for learning how to read Financial Statements. I walk away after a few hours of instruction with some great tools to help me understand how to determine the health of a business by looking at just a few key ratios. I look forward to looking at more advanced courses on reading financial statements. Well worth the time if you have little to no experience with financial statements ~ Danilo T
  12. This is one of the best courses out there on understanding financial statements. I am an entrepreneur and an investor and I loved the course because whatever the professor taught me hit home and will be invaluable for me in terms of knowledge! ~ Yasir K
What you'll learn
  1. Explain how the balance sheet, income statement, and statement of cash flows are used, what they measure, and why we need three statements. 
  2. Differentiate between income and cash flow
  3. Explain what is the balance sheet equation and why the balance sheet equation is the foundational model for accrual accounting/double entry accounting
  4. Define what are assets, liabilities, and equity and how assets, liabilities, and equity relate
  5. Explain how the statement of cash flows and income statement link into the balance sheet
  6. Explain how accounts work like buckets
  7. Locate a real company’s annual report at their website and locate their financial statements within the annual report
  8. Explain who are the six most important stakeholders of a corporation (employees, customers, government, vendors, lenders, investors)
  9. Explain the give and take of a transaction and how to record both sides of the transaction separately with the six stakeholders
  10. Explain what each line item of the balance sheet means and distinguish between current assets, non-current assets, current liabilities, non-current liabilities, and shareholders’ equity
  11. Explain which side of the give and take appears on the income statement and on the statement of cash flows
  12. Explain why you can’t measure profit with cash and why you need to use accrual accounting (double-entry accounting), not cash accounting
  13. Illustrate how accrual accounting can both record cash and profits using a spreadsheet
  14. Explain the basis for bookkeeping and basic accounting without learning bookkeeping
  15. Explain what each line item of the balance sheet means and distinguish between current and noncurrent assets, liabilities, and shareholders’ equity
  16. Explain what each line item of the income statement means, including revenues, expenses, and earnings per share
  17. Explain each important line item for the three sections of the statement of cash flows: operating activities, investing activities, and financing activities 
  18. Explain how the format of the operating activities section differs from the other two activities (investing and financing)
  19. Test your knowledge by completing 28 multiple-choice questions about the 2013 Facebook annual report
  20. Explain four areas that can go wrong in a business (sales pricing, expense control, asset management, and asset financing)
  21. Explain how four ratios (return on equity, profit margin, asset turnover, and financial leverage) can detect problems within the four potential problem areas
  22. Compute return on equity, profit margin, asset turnover, and financial leverage ratios from real company’s financial statements
  23. For the return on equity ratio, drill down into its three component ratios (profit margin, asset turnover, and financial leverage) to pinpoint problem areas
  24. Start with the profit margin ratio and drill down to compute the gross profit percentage and expense percentage from a real company’s financial statements 
  25. Locate management’s explanation for year-to-year changes in ratios from the company’s annual report
  26. Summarize the key reasons for return on equity variations for a real company from year-to-year
  27. Explain how four industries (distribution, manufacturing, service, and financial services differ in the way they make money
  28. Explain how the profit margin, asset turnover, and financial leverage ratios can reveal the key differences in the way that four industries make money
Requirements

No prior financial or accounting knowledge required.

Course Content
7 Sections 26 Lectures 2h 16m total length

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