Reading Financial Statements (CFI)
https://corporatefinanceinstitute.com/course/learn-to-read-financial-statements-free-course/
https://www.credential.net/6ea89591-f3eb-477b-b5c4-fc5c9f2a806e
Balance Sheet
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
Shares
- Common (voting rights, profits) and preferred (fixed dividend)
- Authorised (capable of selling) and outstanding (sold)
- Contributed surplus: value sold for above share face value
Notes
- Significant accounting policies: hows
- Direct information: breakdown of investments and instruments
- Indirect information: unrelated to numbers
Income Statement
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)
Cash Flow Statement
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)