Powerful ideas from top nonfiction
Try Blinkist to get the key ideas from 7,500+ bestselling nonfiction titles and podcasts. Listen or read in just 15 minutes.
Get started
Blink 3 of 8 - The 5 AM Club
by Robin Sharma
Listen to the Intro
How to Read a Financial Report summary
John A. Tracy
Tage C. Tracy
Essential Information for Entrepreneurs, Lenders, Investors, Analysts, and Management
15 mins
Brief summary
How to Read a Financial Report is a guide that simplifies the complexities of financial statements, allowing readers to analyze and understand the financial health of a company. It provides practical tips and tricks for interpreting financial data accurately.
Table of Contents
How to Read a Financial Report
Summary of 5 key ideas
Audio & text in the Blinkist app
Key idea 1 of 5
Financial statements 101
Financial statements provide a wealth of critical insights into a company’s financial performance and health. Let’s walk through the three main statements, and what they tell us.
First, the balance sheet. The balance sheet is like a snapshot of the company’s financial position at a particular point in time. It lists the company’s assets, liabilities, and equity. Assets are all the things the company owns – cash, inventory, buildings, and so on. Liabilities are things that the company owes, like loans, accounts you need to pay, and taxes. Equity is the shares owned by the company’s shareholders.
By examining the balance sheet, you’re able to see a company’s ability to turn assets into cash to cover any short-term obligations, what we call a company’s liquidity. You can look at its capital structure, which is a comparison of the debt and equity (the amount you owe and the amount your shareholders own) to your actual capital. Finally, you can see your working capital, which is the excess of current assets over current liabilities. In other words, this is the amount of money or assets you’d have if you were to pay off everything and shows a company’s ability to fund things in the near term.
Next, you’ve got the income statement. This summarizes the company’s revenue and expenses over a period of time. Revenue is the amount of money you’ve got coming into the company but remember that it’s different from profit. You could be bringing a lot of money in, but it might be costing you just as much to make it happen. Your profit is the amount of money you have left after all your expenses are paid.
The key things you’re looking for here are the revenue growth trends, performance by business segment, and profitability margins. That last one is a bit confusing, so let’s take a closer look.
Your profitability margins look at your profit in a couple of different ways. There’s the gross profit margin, that compares your profit to all your sales. How much money does one sale make? The operating margin is similar but considers the cost of what it took to get that sale over the line. Your net profit compares your profit to the revenue – maybe you have a lot of money coming in, but it all might be funneled back into expenses.
Your last financial statement is the statement of cash flow. We’re going to look at this in a bit more detail in a moment but think of it as tracking where cash came from and where it’s being spent over a period of time.
Looking at all three financial statements together provides a comprehensive view of the company’s financial situation. They interact with each other, and analysts will look at all three to gain critical insight into the company’s health. For example, a statement might show sluggish revenue growth, but healthy margins and a strong cash flow with ample working capital. No one number can tell you everything about a company’s financial position. By looking at all three statements, you’ll paint a full picture of the company’s performance, health, structure, and cash flows.
Want to see all full key ideas from How to Read a Financial Report?
Key ideas in How to Read a Financial Report
More knowledge in less time
Read or listen
Get the key ideas from nonfiction bestsellers in minutes, not hours.
Find your next read
Get book lists curated by experts and personalized recommendations.
Shortcasts New
We’ve teamed up with podcast creators to bring you key insights from podcasts.
What is How to Read a Financial Report about?
How to Read a Financial Report (1980) serves as a comprehensive guide that demystifies the complexities of evaluating a company's fiscal health. It explores balance sheets and income reports, clarifies the fundamentals of financial ratios, and explains any accompanying notes, offering tools for a clear and confident assessment of a business's economic status.
How to Read a Financial Report Review
How to Read a Financial Report gives valuable insights into understanding and analyzing financial reports. Here's why this book is worth reading:
- The book provides clear explanations of complex concepts, making it accessible for readers without a finance background.
- Practical examples and case studies help readers apply the knowledge gained, making it a useful resource for professionals and entrepreneurs.
- The authors offer step-by-step guidance on how to interpret financial statements, empowering readers to make informed decisions.
Who should read How to Read a Financial Report?
- Investors
- Managers
- Non-financial professionals
Categories with How to Read a Financial Report
Book summaries like How to Read a Financial Report
People ❤️ Blinkist
Sven O.
It's highly addictive to get core insights on personally relevant topics without repetition or triviality. Added to that the apps ability to suggest kindred interests opens up a foundation of knowledge.
Thi Viet Quynh N.
Great app. Good selection of book summaries you can read or listen to while commuting. Instead of scrolling through your social media news feed, this is a much better way to spend your spare time in my opinion.
Jonathan A.
Life changing. The concept of being able to grasp a book's main point in such a short time truly opens multiple opportunities to grow every area of your life at a faster rate.
Renee D.
Great app. Addicting. Perfect for wait times, morning coffee, evening before bed. Extremely well written, thorough, easy to use.
People also liked these summaries
4.7 Stars
Average ratings on iOS and Google Play
37 Million
Downloads on all platforms
10+ years
Experience igniting personal growth
How to Read a Financial Report FAQs
What is the main message of How to Read a Financial Report?
The main message of How to Read a Financial Report is to help readers understand and interpret financial reports.
How long does it take to read How to Read a Financial Report?
The reading time for How to Read a Financial Report may vary. However, the Blinkist summary can be read in just 15 minutes.
Is How to Read a Financial Report a good book? Is it worth reading?
How to Read a Financial Report is worth reading for those seeking financial literacy. It simplifies complex concepts and provides practical guidance.
Who is the author of How to Read a Financial Report?
The authors of How to Read a Financial Report are John A. Tracy and Tage C. Tracy.
What to read after How to Read a Financial Report?
If you're wondering what to read next after How to Read a Financial Report, here are some recommendations we suggest:
- Accounting for Non-Accountants by Wayne A. Label
- The Financial Numbers Game by Charles W. Mulford
- Eat More, Live Well by Megan Rossi
- Accounting Made Simple by Mike Piper
- Creativity, Inc. by Ed Catmull with Amy Wallace
- Brag Better by Meredith Fineman
- The 5 Love Languages by Gary Chapman
- The ChatGPT Millionaire by Neil Dagger
- Communication Miracles for Couples by Jonathan Robinson
- The Trading Game by Gary Stevenson