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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Instructed by David Johnson Business / Finance
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  • Lectures 20
  • Length 1.5 hours
  • Skill Level Beginner Level
  • Languages English
  • Includes Lifetime access
    30 day money back guarantee!
    Available on iOS and Android
    Certificate of Completion
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About This Course

Published 12/2014 English

Course 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.

What are the requirements?

  • There are no prerequisites for the course. You do not need to know anything about accounting or finance

What am I going to get from this course?

  • Explain how three financial statements (balance sheet, income statement, and statement of cash flows) are used, what the three financial statements 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 (also called 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 what are the give and take of a transaction, how accounting records the give and take for transactions with the six stakeholders, and how each side of a transaction with a stakeholder can be recorded separately from the other
  • 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 assets, non-current assets, current liabilities, non-current 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 means: 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
  • Start with the return on equity ratio and drill down into 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 profit margin, asset turnover, and financial leverage from the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of a real 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

What is the target audience?

  • 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

What you get with this course?

Not for you? No problem.
30 day money back guarantee.

Forever yours.
Lifetime access.

Learn on the go.
Desktop, iOS and Android.

Get rewarded.
Certificate of completion.

Curriculum

Section 1: Read Basic Financial Statements
04:28

Welcome to the class and see what we will cover and why. Also, get introduced to your instructor.

05:01

In this module you will be able to

  • Explain how three financial statements (balance sheet, income statement, and statement of cash flows) are used,
  • Explain what the three financial statements measure
  • Explain why we need three statements.
  • Differentiate between income and cash flow.
4 questions

Test your knowledge by answering multiple choice questions about the What Are Financial Statements? lecture.

03:49

In this module you will be able to

  • Explain what is the balance sheet equation
  • Explain why the balance sheet equation is the foundational model for accrual accounting (also called double entry accounting)
  • Define what are assets, liabilities, and equity
  • Explain how assets, liabilities, and equity relate.
5 questions

Test your knowledge by answering multiple choice questions about the The Balance Sheet Equation lecture.

04:10

In this module, you will be able to

  • Explain how the statement of cash flows and income statement link into the balance sheet
  • Explain how accounts work like buckets.
4 questions

Test your knowledge by answering multiple choice questions about the How Do Financial Statements Relate? lecture.

Section 2: Quick Look: Read Financial Statements of Whole Foods
03:55

In this module you will be able to

  • Locate Whole Foods’ annual report at their website
  • Locate Whole Foods’ their balance sheet within the annual report.
  • Relate some interesting details about the company and its founder
  • Explain the important line items for assets, liabilities and equity on a balance sheet.
5 questions

Test your knowledge by answering multiple choice questions about the Whole Foods Balance Sheet lecture.

03:49

In this module you will be able to

  • Locate Whole Foods’ statement of operations (income statement) in its annual report
  • Explain what are the important elements of revenues and expenses for a statement of operations
  • Explain what is earnings per share
  • Explain how the statement of operations relates to retained earnings on the balance sheet.
4 questions

Test your knowledge by answering multiple choice questions about the Whole Foods Statement of Operations lecture.

05:13

In this module you will be able to

  • Locate Whole Foods’ statement of cash flows in its annual report
  • Explain what are the important elements of operating, investing, and financing activities on a statement of cash flows
  • Explain how the statement of cash flows relates to cash on the balance sheet.
5 questions

Test your knowledge by answering multiple choice questions about the Whole Foods Statement of Cash Flows lecture.

Section 3: Where the numbers come from: Accrual Accounting Basics
05:41

In this module, you will be able to

  • Explain who are the six most important stakeholders of a corporation (employees, customers, government, vendors, lenders, investors)
  • Explain what are the give and take of a transaction
  • Explain how accounting records the give and take for transactions with the six stakeholders
  • Explain which side of the give and take appears on the income statement and on the statement of cash flows.
5 questions

Test your knowledge by answering multiple choice questions about the Accrual Accounting Basics lecture.

03:50

In this module, you will be able to

  • Explain why you can’t measure profit with cash
  • Explain why you need to use accrual accounting (double-entry accounting), not cash accounting.
4 questions

Test your knowledge by answering multiple choice questions about the Can’t Measure Profit with Cash lecture.

05:57

In this module you will be able to

  • 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 how each side of a transaction with a stakeholder can be recorded separately from the other
5 questions

Test your knowledge by answering multiple choice questions about the How Accrual Accounting Measures Both Cash and Profits Cash lecture

Section 4: Deep Dive: Read Financial Statements of Sherwin Williams
08:46

In this module, you will be able to

  • Locate Sherwin Williams’ annual report from its website
  • Locate the balance sheet in the annual report
  • Relate some important details about the company’s business
  • Explain what each line item of the balance sheet means
  • Distinguish between current assets, non-current assets, current liabilities, non-current liabilities, and shareholders’ equity.
5 questions

Test your knowledge by answering multiple choice questions about the Sherwin Williams Financial Statements: Balance Sheet lecture.

04:14

In this module, you will be able to

  • Locate Sherwin Williams’ income statement from its annual report
  • Explain what each line item of the income statement means, including revenues, expenses, and earnings per share.
4 questions

Test your knowledge by answering multiple choice questions about the Sherwin Williams Financial Statements: Income Statement lecture.

06:31

In this module you will be able to

  • Locate the statement of cash flows for Sherwin Williams from its annual report
  • Explain each important line item for the three sections of the statement: 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)
5 questions

Test your knowledge by answering multiple choice questions about the Sherwin Williams Financial Statements: Statement of Cash Flows lecture.

Section 5: Test What you have learned: Facebook Case Study
01:29

    In this module you will be able

    Test the knowledge you have acquired so far by completing 28 multiple-choice questions about the 2013 Facebook annual report presented in quiz format.

28 questions

Test your knowledge by answering multiple choice questions about the Case Study: Facebook.

Section 6: What the Financial Statements Tell You Through Ratios
07:32

In this module you will be able to

  • 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.
5 questions

Test your knowledge by answering multiple choice questions about the Introduction to Key Ratios lecture.

05:49

In this module you will be able to

  • Compute return on equity ratio from Sherwin Williams’ financial statements
  • Explain how to drill down into three component ratios (profit margin, asset turnover, and financial leverage) to pinpoint problem areas.
5 questions

Test your knowledge by answering multiple choice questions about the Compute Sherwin Williams Return on Equity lecture.

06:05

In this module you will be able to

  • Compute the profit margin for Sherwin Williams from its financial statements
  • Drill down and compute the gross profit percentage and expense percentage from its financial statements. T
  • Locate management’s explanation for year-to-year changes from the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of the annual report.
5 questions

Test your knowledge by answering multiple choice questions about the Compute Sherwin Williams Profit Margin lecture.

03:45

In this module you will be able to

  • Compute the asset turnover for Sherwin Williams.
  • Locate management’s explanation for year-to-year changes from the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of the annual report.
5 questions

Test your knowledge by answering multiple choice questions about the Compute Sherwin Williams Asset Turnover lecture.

03:40

In this module you will be able to

  • Compute the financial leverage for Sherwin Williams
  • Locate management’s explanation for year-to-year changes from the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of the annual report.
  • Summarize the key reasons for return on equity variations for Sherwin Williams from year-to-year
5 questions

Test your knowledge by answering multiple choice questions about the Compute Sherwin Williams Financial Leverage lecture.

07:35

In this module you will be able to

  • 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
4 questions

Test your knowledge by answering multiple choice questions about the Compare Key Ratios among Companies lecture.

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Instructor Biography

David Johnson, Professor at Northcentral University

David Johnson, Ph.D., is a full-time faculty member at Northcentral University.

He has over 30 years teaching experience at the college level, with 25 years teaching accounting. Over the years he has grown frustrated with the way accounting is taught, which inspired him to obtain his Ph.D. in education from the University of Minnesota. He also has a masters degree in marketing/finance from the J. L. Kellogg Graduate School of Management, Northwestern University and a bachelors degree in accounting from the University of Illinois. He began his career in public accounting after passing the CPA exam.

His passion is instruction and how people learn. He has designed his Udemy course with principles learned from his Ph.D. studies, recognizing that most people want to be able to determine how a company is doing by reading financial statements. They don't want to become accountants first.

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