Reading Financial Statements (CFI)


aka Statement of Financial Position

Current = <1 year

Assets and liabilities

  • Deferred taxes: timing difference between accounting income and taxable income → can be asset and/or liability
  • Goodwill: e.g. brand, customers, premium paid on acquisition
  • Intangible: e.g. trademark, patent, copyright
  • Contingencies: e.g. lawsuit with expected future payout

e.g. 12 month subscription for £100 → both cash and unearned revenue +£100, each month unearned -£10, revenue +£10


  • Common (voting rights, profits) and preferred (fixed dividend)
  • Authorised (capable of selling) and outstanding (sold)
  • Contributed surplus: value sold for above share face value


  • Significant accounting policies: hows
  • Direct information: breakdown of investments and instruments
  • Indirect information: unrelated to numbers

aka P&L, Statement of Operations

Single- vs muiltiple-step (single net income line vs lines for operating income, pre-tax income, etc)

COGS, SGA (advertising, legal/admin fees, office supplies, rent, etc), other income or expenses (sales of investments, forex, etc)

Operating (day-to-day), investing (non-current assets / M&As), financing (shares or debt) activities

Direct (separated into cash recevied and cash paid) vs indirect (start with net income and add non-cash (working capital) adjustments e.g. accounts receivable, accounts payable, inventory)