How to Read Financial Statements: Build Financial Literacy.

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 flowExplain what is the balance sheet equation and why the balance sheet equation is the foundational model for accrual accounting/double entry accountingDefine what are assets, liabilities, and equity and how assets, liabilities, and equity relateExplain how the statement of cash flows and income statement link into the balance sheetExplain how accounts work like bucketsLocate a real company’s annual report at their website and locate their financial statements within the annual reportExplain 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 stakeholdersExplain which side of the give and take appears on the income statement and on the statement of cash flowsExplain why you can’t measure profit with cash and why you need to use accrual accounting (double-entry accounting), not cash accountingIllustrate how accrual accounting can both record cash and profits using a spreadsheetExplain the basis for bookkeeping and basic accounting without learning bookkeepingExplain what each line item of the balance sheet means and distinguish between current and noncurrent assets, liabilities, and shareholders’ equityExplain what each line item of the income statement means, including revenues, expenses, and earnings per shareExplain each important line item for the three sections of the statement of cash flows: operating activities, investing activities, and financing activitiesExplain 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 reportExplain 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 areasCompute return on equity, profit margin, asset turnover, and financial leverage ratios from real company’s financial statementsFor the return on equity ratio, drill down into its three component ratios (profit margin, asset turnover, and financial leverage) to pinpoint problem areasStart with the profit margin ratio and drill down to compute the gross profit percentage and expense percentage from a real company’s financial statementsLocate management’s explanation for year-to-year changes in ratios from the company’s annual reportSummarize the key reasons for return on equity variations for a real company from year-to-yearExplain how four industries (distribution, manufacturing, service, and financial services differ in the way they make moneyExplain how the profit margin, asset turnover, and financial leverage ratios can reveal the key differences in the way that four industries make moneyShow moreShow less 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. Who this course is for: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 bookkeepingManagers who want to read and understand financial statements without learning bookkeepingInvestors who want to read and understand annual reports and 10KsNon-accounting/finance employees in companies who want to determine how their company is doing without taking an accounting courseAccounting/finance majors should not take the course