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

What you'll learn
Explain how the balance sheet, income statement, and statement of cash flows are used, what they measure, and why we need three statements.
Differentiate between income and cash flow
Explain what is the balance sheet equation and why the balance sheet equation is the foundational model for accrual accounting/double entry accounting
Define what are assets, liabilities, and equity and how assets, liabilities, and equity relate
Explain how the statement of cash flows and income statement link into the balance sheet
Explain how accounts work like buckets
Locate a real company’s annual report at their website and locate their financial statements within the annual report
Explain who are the six most important stakeholders of a corporation (employees, customers, government, vendors, lenders, investors)
Explain the give and take of a transaction and how to record both sides of the transaction separately with the six stakeholders
Explain which side of the give and take appears on the income statement and on the statement of cash flows
Explain why you can’t measure profit with cash and why you need to use accrual accounting (double-entry accounting), not cash accounting
Illustrate how accrual accounting can both record cash and profits using a spreadsheet
Explain the basis for bookkeeping and basic accounting without learning bookkeeping
Explain what each line item of the balance sheet means and distinguish between current and noncurrent assets, liabilities, and shareholders’ equity
Explain what each line item of the income statement means, including revenues, expenses, and earnings per share
Explain each important line item for the three sections of the statement of cash flows: operating activities, investing activities, and financing activities
Explain how the format of the operating activities section differs from the other two activities (investing and financing)
Test your knowledge by completing 28 multiple-choice questions about the 2013 Facebook annual report
Explain four areas that can go wrong in a business (sales pricing, expense control, asset management, and asset financing)
Explain how four ratios (return on equity, profit margin, asset turnover, and financial leverage) can detect problems within the four potential problem areas
Compute return on equity, profit margin, asset turnover, and financial leverage ratios from real company’s financial statements
For the return on equity ratio, drill down into its three component ratios (profit margin, asset turnover, and financial leverage) to pinpoint problem areas
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
Locate management’s explanation for year-to-year changes in ratios from the company’s annual report
Summarize the key reasons for return on equity variations for a real company from year-to-year
Explain how four industries (distribution, manufacturing, service, and financial services differ in the way they make money
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
There are no prerequisites for the course. You do not need to know anything about accounting or finance
Description
"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: Read Financial Statements. What is a balance sheet, income statement and statement of cash flows and how each is different 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 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 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 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 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 followed by a multiple-choice quiz. A case is provided for Facebook. The course will take 100 minutes to view the videos and another 45 minutes to take the quizzes and do the Facebook case. Are you ready? Let's do this.

Overview

Section 1: Read Basic Financial Statements

Lecture 1 Welcome to the class. Introduction

Lecture 2 What Are Financial Statements

Lecture 3 The Balance Sheet Equation

Lecture 4 How Do Financial Statements Relate?

Section 2: Quick Look: Read Financial Statements of Whole Foods

Lecture 5 Whole Foods Balance Sheet

Lecture 6 Whole Foods Statement of Operations

Lecture 7 Whole Foods Statement of Cash Flows

Section 3: Where the numbers come from: Accrual Accounting Basics

Lecture 8 Accrual Accounting Basics

Lecture 9 Can't Measure Profit With Cash

Lecture 10 How Accrual Accounting Measures Both Cash and Profit

Section 4: Deep Dive: Read Financial Statements of Sherwin Williams

Lecture 11 Sherwin Williams Balance Sheet

Lecture 12 Sherwin Williams Statement of Operations

Lecture 13 Sherwin Williams Statement of Cash Flows

Section 5: Test What you have learned: Facebook Case Study

Lecture 14 Case Study: Facebook

Section 6: What the Financial Statements Tell You Through Ratios

Lecture 15 Introduction to Key Ratios

Lecture 16 Compute Sherwin Williams' Return on Equity

Lecture 17 Compute Sherwin Williams' Profit Margin

Lecture 18 Compute Sherwin Williams' Asset Turnover

Lecture 19 Compute Sherwin Williams' Financial Leverage

Lecture 20 Compare Key Ratios Among Companies

Section 7: Section 7 Update of Financial Statements and Ratios from 2013 to 2019

Lecture 21 Introduction to New Update Module

Lecture 22 Update Sherwin-Williams Financial Statements 2013 to 2019

Lecture 23 Update Facebook Financial Statements 2013 to 2019

Lecture 24 Update Whole Foods Financial Statements 2013 to 2017

Lecture 25 Ratio Comparison of Three Companies 2013 to 2019

Lecture 26 Stock Performance 2013 to 2019

Lecture 27 Bonus Lecture

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,Managers who want to read and understand financial statements without learning bookkeeping,Investors who want to read and understand annual reports and 10Ks,Non-accounting/finance employees in companies who want to determine how their company is doing without taking an accounting course,Accounting/finance majors should not take the course