Reading Financial Reports For Dummies book cover

Reading Financial Reports For Dummies

By: Lita Epstein Published: 04-05-2022

Your personal roadmap to becoming fluent in financial reports

At first glance, the data in financial reports might seem confusing or overwhelming. But, with the right guide at your side, you can learn to translate even the thickest and most complex financial reports into plain English.

In Reading Financial Reports For Dummies, you'll move step-by-step through each phase of interpreting and understanding the data in a financial report, learning the key accounting and business fundamentals as you go. The book includes clear explanations of basic and advanced topics in finance, from the difference between private and public companies to cash flow analysis.

In this book, you'll also find:

  • Full coverage of how to analyze annual reports, including their balance sheets, income statements, statements of cash flow, and consolidated statements
  • Real-world case studies and financial statement examples from companies like Mattel and Hasbro
  • Strategies for analyzing financial reports to reveal opportunities for operations optimization

Reading Financial Reports For Dummies is a can't-miss resource for early-career investors, traders, brokers, and business leaders looking to improve their financial literacy with a reliable, accurate, and easy-to-follow financial handbook.

Articles From Reading Financial Reports For Dummies

page 1
page 2
page 3
page 4
page 5
page 6
page 7
page 8
page 9
page 10
page 11
page 12
111 results
111 results
Reading Financial Reports For Dummies Cheat Sheet

Cheat Sheet / Updated 02-16-2022

If you're looking at a business with an interest in investing in it, you need to read its financial reports. Of course, when it comes to the annual report, you don't need to read everything, just the key parts. Combining the annual report with some of the financial reports a corporation files with the Securities and Exchange Commission (SEC) can help you figure profitability and liquidity ratios and get a better sense of cash flow. Keep this handy Cheat Sheet nearby for a quick reference to reading financial reports, including SEC reports, profitability ratios, liquidity ratios, and cash flow formulas.

View Cheat Sheet
How Internal Financial Reports Differ from the Public Ones

Article / Updated 03-26-2016

Financial reports developed for internal use can vary significantly from what the public sees. Internal reports don't have to follow the strict rules of GAAP (generally accepted accounting principals): They can be designed in any way that helps management make decisions. The data for internal reports are usually the same data that companies need to collect to prepare their external reports, but the internal documents usually include more detail. For example, an external report may show only a number for net sales, whereas internal reports show managers a number for gross sales, details about discounts and returns, and possibly other line items. Internally, a company needs to know how much it's giving up in discounts and also needs to track returns. If the trend for giving discounts is going up, it may indicate a problem with pricing, a change in competition, or an economic downturn. Whatever the problem, management must be alerted in case the company needs to make operational changes to maintain profit margins. If returns are trending upward, it may suggest a quality control problem. Again, management needs to investigate this possibility, but the company certainly doesn't want to include that information in public reports. Companies also commonly develop internal reports to track customers and see whether they're paying their bills on time. This issue becomes a concern only when a company offers credit directly on a store-based credit card; companies don't need to monitor payments on credit cards from third-party vendors. This internal report enables companies to see which customers are behind on their bills and quickly cut off their access to further credit until they catch up. That info is just a sample of the additional detail you may see on internal reports. If you're working for a company and need to track detail internally differently than what you report to the public, talk with your accounting department and see if staff can format the numbers you need into a useful report for decision-making purposes.

View Article
10 Mobile Apps for Financial Report Readers

Article / Updated 03-26-2016

Plenty of apps on the market can help you get key company stock and financial information. Here are some of the best apps for reading financial reports (these are all free). American Economy: This one is a must for all financial report readers. Developed by the Census Bureau, the Bureau of Economic Analysis, and the Bureau of Labor Statistics, it helps you quickly find all the key economic indicators and their trends. You also find dates for upcoming releases. You can download American Economy for Apple devices or for Android devices. Bloomberg: To quickly get a view of the world markets, you can't beat Bloomberg's free app. The chart at the top gives you a quick, colorful overview (green for up, red for down) across the markets worldwide, including the U.S., Great Britain, Germany, and Japan and Hong Kong. You can also catch up on the most current top market stories. Download this app in versions for Apple devices, Blackberry, Android, Windows Phone, and Nokia. You can also find other Bloomberg apps specially for Bloomberg Radio, Bloomberg TV, Bloomberg Businessweek, and Bloomberg Markets Plus. The app is available in multiple languages, including English, French, German, Italian, Japanese, Korean, Polish, Portuguese, Simplified Chinese, Spanish, Traditional Chinese, and Ukrainian. Investors Business Daily for iPAD: This iPad app is a great tool if you subscribe to Investor's Business Daily. The app offers higher resolution for easier reading and incorporates a "translate" feature to enable you to read the stores in numerous languages. Evernote: This app helps you keep those important notes about your financial research and market activity. Evernote is one of the best note-taking apps available. Yahoo! Finance: If you like using Yahoo! Finance online, you'll love working with the app. You can set up your watch list and quickly get real-time prices for the stocks you're watching, plus key fundamental data, charts, and news stories related to your stocks. You can download the Yahoo! Finance app for Apple devices and for Android devices. Apps from your broker: Check out the apps your broker offers. Many online brokers have advanced apps that enable you to research thousands of stocks right from your mobile device or listen to financial programs streamed into your device. Two excellent apps, TD Ameritrade and E*Trade Mobile are among the top free apps from online brokers. Some helpful apps aren't free, but you might find them worth the money: Stock Guru Pro: This app provides real-time analysis for about 7,000 stocks. After you set up your watch list, you get a quick evaluation on financial strength, valuation, momentum, and risk. The app also provides a proprietary guru rating, indicating whether top gurus hold a certain stock. The cost for the app is $29.99. You can download it at https://itunes.apple.com/us/app/stock-guru-pro/id560962698. AnalystRT: This app gives you an easy way to find out what analysts are saying about stocks on your watch list. If you like to follow the analysts as one of your research tools, you can download this app for $2.99. SEC filings for IPAD: This app gives you easy access to SEC filings right on your iPad. The cost is $25.99. LOKI: Fortune 100 Annual Reports: This app includes five years of annual reports for the Fortune 100 companies. If you're primarily watching these companies, this app can simplify your research and keep the data at your fingertips. It's $2.99.

View Article
The Best Web Sources for Financial Report Research

Article / Updated 03-26-2016

Reading up on financial reports needs to become a daily routine for anyone who invests in the stock market. When companies release their financial reports, that can mean a major jump up or down in a stock's price. Finding a few good sources on the Internet to help with a quick review of the key news of the day can go a long way toward keeping you aware of what's going on with your portfolio. Other sources mentioned here help you dig deeper into the numbers when you want to research particular stocks you're considering buying or selling for your portfolio. Here are few good places to start your financial report reading routine: Bloomberg: You can read about key financial news or watch on streaming videos. This resource is great for a quick overview of the financial news of the day and to see which companies are making the news that day. CNN Money: At CNN Money, you can find stories from CNN, Money Magazine, and Fortune. It's a good stop to get the big news from three key financial news sources. Investors Business Daily: Investors Business Daily offers readers the most in-depth coverage of the stock market from the prospective of individual companies. You also get info on key industry trends. MarketWatch: MarketWatch enables you to find stories from the Wall Street Journal and Barron's. In addition to financial news, it's a good source for personal finance stories. NASDAQ: The NASDAQ news website is an excellent free resource for information on companies making the news, as well as industry trends. It's a good quick stop in the morning to see which companies or industries will likely drive the financial news each day. SEC Edgar: Here you find financial reports filed with the SEC for all companies at the Security and Exchange Commission's Edgar website. You also find tutorials on how to use this valuable resource. Yahoo! Earnings Calendar: You can quickly find out which U.S. companies are filing annual reports each day at the Yahoo! U.S. Earnings Calendar. Wall Street Journal: The best newspaper for business news in the U.S. is the Wall Street Journal. If you plan to keep up-to-date on the daily business news, this is one source you need to check out each day.

View Article
Key Tools on the Web for Analyzing Numbers

Article / Updated 03-26-2016

When you're thinking of buying a stock, you want to quickly be able to determine how that stock is performing compared to others on the stock market. But you can't read financial reports in a vacuum. To assess how well a company is doing, you must compare it to other similar companies, as well as to its overall industry. Hundreds of websites out there can help you research stocks. Here are three must-haves as you plan and then manage your stock portfolio. BizStats.com The best free tool for benchmarking on the web is bizstats.com. With this website, you can compare company and industry performance based on the key line items of an income statement, as well as get a quick overview of the key financial ratios based on particular industry. You can find industry benchmark reports, profitability risk data, and other useful industry statistics for more than 250 industries. You can get industry-average income statements to compare to the companies you're researching and determine whether their performance levels match that of the industry. You can even do this benchmarking based on the size of the company by entering annual sales. This info enables you to compare the financial results for companies to the industry results of companies of the same size. All you need to do is enter the annual sales for the size of company you want to benchmark and then drill down the lists to the type of industry you want to research. TCalc TCalc has an excellent collection of all types. Two key categories of calculators for investors are the Investment Calculators and Retirement Calculators, but you'll also find others that can assist in personal financial decision making. Some of the most useful tools include a calculator that helps you determine your investment or portfolio yield. You can also find a calculator to help you determine whether to choose a traditional or Roth IRA for your retirement savings, as well as a helpful retirement longevity calculator. StockCharts.com When it comes time to decide when to buy or sell a stock, timing the entry or exit points requires you to use stock charts. One of the best free stock chart websites is StockCharts.com. If you're not familiar with using stock charts for decision making, you can find some excellent accompanying online education information to help you learn more about the different types of charts and how to use them. In addition to building charts for specific companies, StockCharts.com has a great collection of performance charts already built for you. Some particularly useful ones include the performance chart for the major U.S. market averages and the S&P sector ETFs chart. The sector chart helps you quickly see which industries are heading up and ones are going down.

View Article
Is One International Financial Reporting Standard Likely?

Article / Updated 03-26-2016

U.S. financial reporting standards are different than the reporting standards of every other country in the industrialized world. The U.S. is the last of the major financial players to adopt the international reporting standards set by the international accounting community. All but the U.S. have made the commitment to adopt the international standards, even though some industrial countries are just beginning the adoption process. Why is this important to you as a financial report reader? You need to understand the differences when you start comparing the results of companies that file their reports based on U.S. GAAP to the results of companies that follow the international standards. In July 2012, the U.S. Financial Accounting Standards Board issued its final staff report on the convergence of U.S. financial reporting standards (the U.S. GAAP) with internationally accepted financial reporting standards issued by the International Accounting Standards Board (IASB). In that final report, the staff gave its support to the convergence of financial reporting standards but did not include for U.S. adoption of the standards. The IASB and the FASB are working together to converge standards on a topic-by-topic basis. Four key standards are now being developed: Revenue recognition: Both the IASB and the FASB know that improvements are needed in how revenue is recognized, which is a critical factor for readers of financial reports. They expect to issue a final principle-based revenue standard that both the GAAP and the IFRS will use by the end of 2013. You can follow the progress of this project at the FASB's website. Financial instruments: These types of instruments helped drive the world into a near depression because their reporting standards need improvement. The financial collapse of 2008 can partially be blamed on the lack of proper standards for reporting credit losses. Check out this project at the FASB website. Leases: Financial statements do not include many types of leases. Instead, the financial report reader must seek details about a company's lease obligations in the notes to the financial statements. These off-the-books transactions can give the financial report reader the impression that the company is in better financial shape than it truly is. You can follow the progress of this project at, also at FASB. Insurance: The U.S. GAAP does comprehensively address insurance, but international standards don't include specific accounting requirements for insurance contracts. This project is the fourth convergence project currently underway. It will likely have the least impact on changes in U.S. reporting standards. When can you expect to start seeing the changes in international financial reporting? As these projects are completed, the changes will occur gradually. Generally, estimates indicate that it will take three to four years for an accounting change to be fully implemented. As a financial report reader, it's important to follow the news about the convergence of international standards because it impacts the information you depend on to make investing decisions.

View Article
Reading Financial Reports for Profitability Ratios

Article / Updated 03-26-2016

You read financial reports to get a sense of a company's financial position and how viable it is in the marketplace. You can test a company's money-making prowess using the following important formulas. Price/earnings ratio compares the price of a stock to its earnings. A ratio of 10 means that for every $1 in company earnings per share, people are willing to pay $10 per share to buy the stock. Price/earnings ratio = Market value per share of stock divided by Earnings per share of stock Dividend payout ratio shows the amount of a company's earnings that are paid out to investors. Use it to determine the actual cash return you get by buying and holding a share of stock. Dividend payout ratio = Yearly dividend per share divided by Earnings per share Return on sales tests how efficiently a company is running its operations by measuring the profit produced per dollar of sales. Return on sales = Net income before taxes divided by Sales Return on assets shows you how well a company uses its assets. A high return on assets usually means the company is managing its assets well. Return on assets = Net income divided by Total assets Return on equity measures how well a company earns money for its investors. Return on equity = Net income divided by Shareholders' equity The gross margin gives you a picture of how much revenue is left after all the direct costs of producing and selling the product have been subtracted. Gross margin = Gross profit divided by Net sales or revenues The operating margin looks at how well a company controls costs, factoring in any expenses not directly related to the production and sales of a particular product. Operating margin = Operating profit divided by Net sales or revenues

View Article
Key Parts in an Annual Report

Article / Updated 03-26-2016

Annual reports can be daunting, and you may be relieved to know that you don’t actually need to scour every page of one. The following parts best serve to give you the big picture: Auditor’s report: Tells you whether the numbers are accurate and whether you should have any concerns about the future operation of the business Financial statements: The balance sheet, the income statement, and the statement of cash flows; where you find the actual financial results for the year Notes to the financial statements: Details about potential problems with the numbers or how the numbers were derived Management’s discussion and analysis: The higher-ups’ breakdown of the financial results and other factors that impact the company’s operations The rest is fluff.

View Article
Key Securities and Exchange Commission Reports

Article / Updated 03-26-2016

Reports to the government are more extensive than the glossy reports sent to shareholders. Although many different types of forms must be filed with the Securities and Exchange Commission, you can get most of the juicy information from just a few: 10-K: Annual report that provides a comprehensive overview of the corporation’s business 10-Q: Quarterly report that describes key financial information about the prior three months 8-K: Shows any major events that could impact the financial position of the company Forms 3 to 5: Reflect changes in ownership of stock by directors, officers, and major stockholders, giving you an idea of the view from the inside

View Article
Reading Financial Reports for Liquidity Ratios

Article / Updated 03-26-2016

If a company doesn’t have cash on hand to cover its day-to-day operations, it’s probably on shaky ground. Use the following formulas to find out whether a company has plenty of liquid (easily converted to cash) assets. Current ratio gives you a good idea of whether a company will be able to pay any bills due over the next 12 months with assets it has on hand. Current ratio = Current assets divided by Current liabilities Quick ratio or acid test ratio shows a company’s ability to pay its bills using only cash on hand or cash already due from accounts receivable. It doesn’t include money anticipated from the sale of inventory and the collection of the money from those sales. Quick ratio = Quick assets divided by Current liabilities Interest coverage ratio lets you know whether a company is bringing in enough money to pay interest on whatever outstanding debt it has. Interest coverage ratio = EBITDA divided by Interest expense

View Article
page 1
page 2
page 3
page 4
page 5
page 6
page 7
page 8
page 9
page 10
page 11
page 12