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Learning path 2 of 9

Financial literacy and accounting

Read a company's numbers with confidence. Revenue, profit, cash flow, assets and liabilities, and how the three financial statements fit together.

Level
Beginner to intermediate
Lessons
19 ready
Time
About 2 h 7 min published, roughly 6 hours when complete
Module tests
5 of 5 modules

19 lessons in this path. Progress is saved in your browser as you go.

0 of 19
Start this path

Every serious question about a company eventually becomes a question about its numbers. Is it making money? Is that money real cash? What does it own, and what does it owe?

This path teaches the language of accounting from the ground up, using small made-up businesses before moving to real annual reports. You do not need to become an accountant. You need to read the three main statements well enough to follow an argument about a company, and to notice when something does not add up.

Who this path is for

Anyone who has finished the foundations path, or already knows what a share is, and wants to understand the financial statements companies publish. Basic arithmetic is enough.

What you will be able to do

  • Tell the difference between revenue, profit and cash, and explain why they move separately.
  • Read a simple income statement, balance sheet and cash flow statement.
  • Calculate common measures such as gross margin, operating margin and earnings per share.
  • Explain how the three statements connect, and where to find them in an annual report.

Before you start

  • Stock market foundations: You need to know what a company's shareholders own before the statements describing that ownership make sense.

The route, module by module

Take the modules in this order. Filled stops are lessons you have completed; dashed stops are still being written.

  1. Module 1Profit, cash and what a business owns

    The three ideas the rest of accounting is built on. Revenue and profit, why profit is not cash, and the balance sheet equation.

    1. Revenue, expenses and profit6 min
    2. Profit compared with cash flow7 min
    3. Assets, liabilities and equity7 min
    4. Module test: Profit, cash and what a business owns10 questions

  2. Module 2How accounting records a business

    The accounting ideas behind every statement. Accrual accounting, capital spending and depreciation, working capital, and provisions and impairments.

    1. Accrual accounting and cash accounting7 min
    2. Depreciation, amortisation and capital expenditure7 min
    3. Working capital, inventory and receivables7 min
    4. Provisions, contingent liabilities and impairments7 min
    5. Module test: How accounting records a business10 questions

  3. Module 3The three financial statements

    The income statement, balance sheet and cash flow statement, line by line, and how a change in one shows up in the others.

    1. The income statement7 min
    2. The balance sheet7 min
    3. The cash flow statement7 min
    4. How the three statements connect7 min
    5. Module test: The three financial statements10 questions

  4. Module 4Profit levels, margins and earnings per share

    The measures analysts quote most often, how each is calculated from the statements, and the questions each one answers.

    1. Operating profit, EBITDA and net profit7 min
    2. Profit margins and what they reveal6 min
    3. Earnings per share6 min
    4. Module test: Profit levels, margins and earnings per share10 questions

  5. Module 5Reading a real annual report

    Where to find the statements in an annual report, what the notes, the auditor's report and management's discussion add, and the accounting standards behind them.

    1. How an Indian annual report is organised6 min
    2. Notes to the financial statements6 min
    3. The auditor's report6 min
    4. Management discussion and analysis6 min
    5. Indian accounting standards (Ind AS)8 min
    6. Module test: Reading a real annual report10 questions
  • Fundamental analysisJudge a business on its merits. Business models, growth, profitability, debt, valuation ratios, intrinsic value and the red flags of poor governance.
  • Practical stock researchResearch a company from scratch. Products and customers, statements, competitors, management, exchange filings, red flags and a written research report.