Print
Email
While “Financial Statements” doesn’t provide direct analysis to the “dirtier” accounting entries (which are often unique and difficult to categorize), the book is certainly valuable for a wide range of investors: from beginners without an understanding of the financial statements and their construction, to the more advanced analyst who is looking to solidify their understanding of financial accounting. The first section covers the structure of the financial statements (balance sheet, income statement, and cash flow statement) and key vocabulary/definitions (like the difference between costs and expenses), a good primer for beginners/novices. Mr. Ittelson also walks through the connection between the financial statements, and how they come together to collectively portray the flow of money and goods through the business.
The second section is a walk-through of typical business transactions (paying employees, buying PP&E, etc), and how they affect the financial statements. The 33 examples follow a company from its IPO through the process of its essential business functions, covering topics such as depreciation, accounting for inventory, and acquisitions along the way. In my opinion, this section is extremely handy for more experienced investors who are looking to understand the language of business (which can be confusing at times for those outside of accounting) and what a company’s financial statements are telling you through changes in account values over time.
Overall, “Financial Statements” is a good source for understanding the basics of financial accounting, and the primary knowledge needed to competently interpret financial statements. The biggest issue I have with the book is that it is a bit slow at times (repetitive), but over-learning key topics is not a bad problem to have. For individual investors looking to move towards in-depth analysis, understanding financial statements is a must; Mr. Ittelson’s book is a good place to start.
Disclosure: I paid for my copy of this book, and will not benefit in any way from readers’ purchases.
About the author:
I'm a value investor, with a focus on patience; I wait for great companies that are suffering from short term issues, and load up when those opportunities become present.
Subscribe RSS
