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Managers in a sample of managers at companies with at least 150 employees took a simple financial literacy quiz and got an average of 38% of the questions right.  How is that possible?  There are varying reasons, but none of them are good.  For those who have had limited exposure, or just a plain aversion to "the numbers", there is hope for becoming financially intelligent and increasing your credibility by speaking the language of business. This involves knowing the foundation of financials – getting back to basics.

This is part one of a four part Back to Basics in Corporate Finance series. This module focuses on the finance tool that managers look at the most when analyzing a company’s numbers – the income statement. You may have heard other names used for this statement, such as the statement of operations, consolidated statement of operations, profit & loss (P&L) statement, and statement of earnings.  Don’t let all the jargon confuse or intimidate you.  Get to know the terms and elements of this statement, step by step, and how you can affect the bottom line.  Discover where to look for assumptions and estimates, and how a company measures revenue and expenses.  Calculate key ratios to learn more about a business and whether it’s growing or shrinking its worth.

Discussions include:

  • All the financial jargon and terminology used to say virtually the same thing.
  • How to analyze revenue growth and recognition using real company numbers.
  • How finance professionals use the matching principle to estimate profit.
  • The difference between EBIT (earnings before interest and taxes) and EBITDA (earnings before interest, taxes, depreciation, and amortization).
  • Why Warren Buffet believes cash is king.

When you know how to read an income statement, you will understand the story the financials are telling you.  This training is filled with entertaining stories about real companies, and their cautionary tales of why they failed or succeeded.

Course Series

This course is included in the following series:

Learning Objectives
  • Identify the assumptions and estimates in an income statement
  • Discover key measures used to determine profitability of a company
  • Explore the ratios to see if your company is growing or declining

 

 

 

Last updated/reviewed: August 12, 2023
32 Reviews (102 ratings)

Reviews

1
Anonymous Author
The exam asks about apple ratios from three years: 2011, 2012, 2013; however, only 2012 and 2011 statements are provided (and you must open the video in a separate window to view those during the exam as they are not included in the supporting materials.) Also, the change in ratios in the exam do not actually match the Apple statements provided

4
Anonymous Author
This is the second course I took by Joe Knight and his presentation skills are excellent. It's a basic course but he has valuable insights and touches on real-life examples. On another note --- (for Proformative) it would be nice if you show the correct answer to the missed question on the final exam.

4
Member's Profile
Good, I don't understand using 20% of the exam questions for a feat of memorization was much value add given all the other more fundamental issues that could have been addressed. ALso don't understand including the cash flow and balance sheet information in the supporting materials...

5
Member's Profile
Excellent course presentation. I truly enjoyed the instructor's sense of humor. It made the course easy to watch and kept me engaged unlike some of the other courses. I will be looking for more courses from Joe Knight.

5
Anonymous Author
Excellent review of income statement, p&l, statement of earnings : ) Loved the presentation method combining classroom setting with instructor presentation with slides. I could listen to Joe teach all day!

5
Anonymous Author
The instructor's presentation keeps your attention and make very good points that are easy to remember. Great way to see from a finance point of view from an accountant or vice versa.

4
Anonymous Author
The content and the way how this was delivered is really great but i guess the viewers might get more interested to this training if there are more visuals used.

5
Member's Profile
Good information and well presented, but didn't have all the information on the apple IS needed to complete questions on exam. 2011 was missing.

4
Anonymous Author
I really liked the instructor and the presentation. It was a good basic overview of the income statement without going into a lot of detail.

5
Member's Profile
Quick and easy basic information but invaluable to know. These are the calculations ALWAYS used when measuring month after month.

4
Anonymous Author
Some excess, but overall I felt this was a helpful and knowledgeable assessment that helped me grow or maintain as a professional

5
Anonymous Author
The presenter was easy and interesting to listen to. He made a seemingly bland and overlooked topic interesting and relevant.

4
Anonymous Author
This is a great course for those new to accounting concepts, or for those who have forgotten what they learned in college.

5
Anonymous Author
This instructor is easy to follow. He uses good examples and it is a easily digestible introduction to income statements.

4
Member's Profile
Great course on the basics of the income statement. I really enjoyed the real life simulations presented in the course.

5
Anonymous Author
Interesting topic, although basic but Joe is an excellent presenter and i don't mind taking more of his classes.

5
Member's Profile
This was a very lively and engaging review. Worthwhile for anyone, but especially someone new to Finance.

4
Anonymous Author
I really liked the instructor's presentation of the course. He was upbeat and easy to understand.

5
Anonymous Author
Just an excellent presentation, a pleasant course with a lot of energetic examples and dynamics.

4
Member's Profile
Very professionally shot videos. Good insightful examples, and meaningful supporting materials.

5
Member's Profile
Joe Knight has a great style of explaining the material and makes it easy to understand.

5
Anonymous Author
Great job!!! Great review of many items and very concise and easy to understand

5
Anonymous Author
Good overview albeit very high-level. Instructor very entertaining.

4
Anonymous Author
This is a good basic or refresher course of the income statement.

4
Member's Profile
Did not like questions about Apple. Numbers not in front of me.

Anonymous Author
very basic --good for non-finance professionals

5
Anonymous Author
Great course. Music is a bit annoying though.

5
Member's Profile
Great course! Very informative and helpful.

5
Anonymous Author
A little too basic for cpe purposes

4
Anonymous Author
good general overview

4
Anonymous Author
It was pretty basic

4
Member's Profile
Good overview

Prerequisites
Course Complexity: Foundational

No Advanced Preparation or Prerequisites are required for this course.

Education Provider Information
Company: Illumeo, Inc., 75 East Santa Clara St., Suite 1215, San Jose, CA 95113
Contact: For more information regarding this course, including complaint and cancellation policies, please contact our offices at (408) 400- 3993 or send an e-mail to .
Course Questions and Answers(10 Questions)
Member's Profile

It is my understanding, from a planning process standpoint, the budget comes before the income statement. That is, the budgeted data in the income statement's line items come from the line items in the budget, appropriately rolled up into the income statement's line items. Right?

Member's Profile

Yes that is correct, a budget is just a plan so a budgeted income statement is a planned income statement.

User picture
Member's Profile
Member's Profile

Joe,

Another question if I may. How, specifically, are income statements updated during the year? A classic example would be if the client has adopted "rolling forecasts" where every quarter a new/updated 4 quarters of forecasts are available. Thanks.

Member's Profile

Alan,
If it's a public company they are required to produce quarterly as well as annual income statements. Private companies can choose the frequency of releasing their income statements. You should find the details to know what period you are viewing at the top of each income statement. Typically they are released quarterly and annually but some do a trailing 12 month (TTM) or monthly. Forecasts are typically shown in budgets rather than an income statement and that should also be listed at the top so that you know what they are looking at.
Joe

Member's Profile

Joe,

Thanks. However, I mis-communicated. I was not asking the question apropos income statements as actuals; rather income statements as plans and how those plans are updated when key assumptions change. I gave as an example how is the income statement updated when the forecast changes mid year for the rest of the year or every quarter as the income statement is always 12 months ahead..

Alan , .

Member's Profile

Alan,
Great question, here's how I'll answer it. It depends... (the standard accounting answer). The main thing you want to see in re-budgeted or re-forecasted statements are that they are consistent. Either they don't update and they live with the original forecast or they do it on a pre-described path. Don't do it quarterly one year and switch to monthly the next. Again at the top it should clearly state what you are looking at and might even compare it to the previously forecasted statement. Good accounting requires a consistent approach in actual and forecasted statements.
Joe

Member's Profile

Joe,

I'd like to continue this discussion. However, I'd like to share an attachment or two. Any chance you could send me an email I could use? I hope so.

Mine is alanatoptimizedincomestaterment [dot] com.

Thanks,

Alan

Member's Profile

Alan,
Go ahead and email them to mailatbusiness-literacy [dot] com.
Joe

Instructor for this course
Course Syllabus
INTRODUCTION AND OVERVIEW
  The Basics of Finance and Accounting 6:58
  The Income Statement 10:28
  The Matching Principle11:57
  Analysis 8:10
SUPPORTING MATERIALS
  Workbook: The Income StatementPDF
  The Income Statement Study Guide/GlossaryPDF
REVIEW & TEST
  REVIEW QUESTIONSquiz
 FINAL EXAMexam