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  • 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 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 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

"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.

  • No requirements
  • Anyone who seeks to understand financial statements, such as investors, business people, students
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  • Section 1 : Read Basic Financial Statements 4 Lectures 00:19:15

    • Lecture 1 :
    • Welcome to the class. Introduction Preview
    • Welcome to the class and see what we will cover and why. Also, get introduced to your instructor.
    • Lecture 2 :
    • What are Financial Statements
    • 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.
    • Lecture 3 :
    • The Balance Sheet Equation
    • 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.
    • Lecture 4 :
    • How Do Financial Statements Relate?
    • 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.
  • Section 2 : Quick Look: Read Financial Statements of Whole Foods 3 Lectures 00:12:57

    • Lecture 1 :
    • Whole Foods Balance Sheet
    • 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.
    • Lecture 2 :
    • Whole Foods Statement of Operations
    • 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.
    • Lecture 3 :
    • Whole Foods Statement of Cash Flows
    • 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.
  • Section 3 : Where the numbers come from: Accrual Accounting Basics 3 Lectures 00:15:28

    • Lecture 1 :
    • Accrual Accounting Basics
    • 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.
    • Lecture 2 :
    • Can't Measure Profit with Cash
    • 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.
    • Lecture 3 :
    • How Accrual Accounting Measures Both Cash and Profit
    • 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
  • Section 4 : Deep Dive: Read Financial Statements of Sherwin Williams 3 Lectures 00:19:31

    • Lecture 1 :
    • Sherwin Williams Balance Sheet
    • 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.
    • Lecture 2 :
    • Sherwin Williams Statement of Operations
    • 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.
    • Lecture 3 :
    • Sherwin Williams Statement of Cash Flows
    • 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)
  • Section 5 : Test What you have learned: Facebook Case Study 1 Lectures

    • Lecture 1 :
    • Facebook Case with Answers
    • Open this pdf to access the case. Also open the Facebook Case Study Financial Statements.pdf (6165d94ca7c5c.pdf) to refer to the financial statement excerpts in the case. Then, check out the answers with feedback in the Facebook Case Study Answers.pdf (6165d96a10fba.pdf)
  • Section 6 : What the Financial Statements Tell You Through Ratios 6 Lectures 00:34:19

    • Lecture 1 :
    • Introduction to Key Ratios
    • 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.
    • Lecture 2 :
    • Compute Sherwin Williams' Return on Equity
    • 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.
    • Lecture 3 :
    • Compute Sherwin Williams' Profit Margin
    • 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. • 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.
    • Lecture 4 :
    • Compute Sherwin Williams' Asset Turnover
    • 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.
    • Lecture 5 :
    • Compute Sherwin Williams' Financial Leverage
    • 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
    • Lecture 6 :
    • Compare Key Ratios Among Companies
    • 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
  • Section 7 : Section 7 Update of Financial Statements and Ratios from 2013 to 2019 6 Lectures 00:34:50

    • Lecture 1 :
    • Introduction to New Update Module
    • This lecture introduces the five topics of this update module that reviews the financial statements, ratios, and stock prices of Sherwin-Williams, Facebook, and Wholefoods. Please download the eBook that covers the material in the five lectures of this update module and follow along.
    • Lecture 2 :
    • Update Sherwin-Williams Financial Statements 2013 to 2019
    • This lecture will point out notable changes in the income statement, balance sheet, and statement of cash flows for Sherwin-Williams between 2013 and 2019 and will analyze the company’s ratios.
    • Lecture 3 :
    • Update Facebook Financial Statements 2013 to 2019
    • This lecture will point out notable changes in the income statement, balance sheet, and statement of cash flows for Facebook between 2013 and 2019 and will analyze the company’s ratios.
    • Lecture 4 :
    • Update Whole Foods Financial Statements 2013 to 2017
    • This lecture will point out notable changes in the income statement, balance sheet, and statement of cash flows for Whole Foods between 2013 and 2017 and will analyze the company’s ratios
    • Lecture 5 :
    • Ratio Comparison of Three Companies 2013 to 2019
    • This lecture will compare the ROE for the three companies and the components of ROE: Profit margin, asset turnover, and financial leverage to determine how well they performed.
    • Lecture 6 :
    • Stock Performance 2013 to 2019
    • This lecture will compare the stock performance for the three companies to reveal which would have been the best investment.
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David Johnson, Ph.D., is a retired 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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