You don't have to take a CEO's word for how a company is doing. You don't have to take your financial advisor's word either. The whole point of learning financial analysis is to read the numbers yourself and make up your own mind. This is the introduction — the map of what reading a company's financials actually involves. Start with what the company sells; if you can't understand that, it's a flag (ask Enron). Then look at the gap between when cash comes in and when revenue gets recognized. From there, it's the ratios: profitability (are they making money), liquidity (can they pay this month's bills), solvency (can they survive the long haul), cash flow (free cash flow especially), and the working-capital ratios that show how fast a business turns sales into actual cash. Each gets its own deeper dive later — this one is the lay of the land. Why bother? Pick your reason. As an investor, you can call buy/hold/sell on your own. As an employee, you can read the company you work for and feel it in your gut when it's time to leave before the layoffs. And if you ever want to buy or grow a business, this is how you spot the good ones. Pick a company you like — or work for, or want to start — and study it every quarter. The skill compounds.

Hosted by Julie Bonner. Bookkeeping and financial help for business owners — https://coeurbridge.com