Financial Statements For Beginners

Want to learn accounting?

Study these 9 simple infographics (a visual thread) ↓

"Margin of Safety" by Seth Klarman is an incredible investing book.

But a used copy costs $1,200!

Here are 26 short investing lessons from this classic book (for free): 1: Markets are volatile. Never invest unless you are sure a "margin of safety" exists.

2: Focus on the intrinsic value of an investment. Only act when there's a meaningful difference between value and price.

The P/E ratio SUCKS.

It’s a flawed metric that deceives investors.

Here's exactly why the P/E ratio can be INCREDIBLY misleading (and what to use instead): The P/E ratio's flaw is that the "earnings” can be misleading.

If “earnings” aren’t sustainable, or are artificially inflated/depressed, the P/E ratio will be wrong.

Here's all the reasons why that can happen...

7 visuals every investor should memorize:

1: In the long run, stocks win: 2: You make far more money by holding through bull markets that you lose by holding through bear markets.

The Rule of 72 is the MOST IMPORTANT "mental math trick" for investors to know.

Here's how it works: Humans tend to think *linearly*.

When we see a curve, we mentally approximate it by a straight line.

This helps us cope with changes in the world around us.

Tom Engle has lived off of his portfolio for 40 years (!!!)

How? He's an incredible investor with a BRILLIANT cash management strategy.

Here's exactly how it works (step by step): Let's say Tom's portfolio is worth $100,000 in the middle of a bull market.

Tom is happy with this number and wants to protect it.

He mentally calls this $100,000 his "protected value."

All his cash management decisions are based on this number.

8 visuals every investor should memorize:

1: In the long run, stocks win: 2: You make far more money by holding through bull markets that you lose by holding through bear markets.

My worst investing decisions ever all contain the same word:

Sell

But that doesn't mean I "buy and forget"

Here are the exact reasons I will exit an investment: 1: Thesis Busted

Translation: I was wrong

This could be because:
▪️Brand deteriorated
▪️Management isn't executing
▪️I misjudged the moat
▪️Rising competition

If the original reasons I bought are no longer valid, I admit defeat and move on

How to analyze an income statement, FAST.

Study these 7 infographics:

1: Income Statement Overview 2: Three Types of Analysis

The most powerful investing principles I've ever learned are counterintuitive.

That’s logical - if they were intuitive, I wouldn't need to learn them.

Here are 7 counterintuitive investing principles I had to learn the hard with (with visuals) 1: Don’t haggle

If a stock is trading at $21, I used to set a limit order for $20.50

But my orders usually didn't fill.

Haggling caused me not to BUY a few mega-winners.

Which is FAR MORE costly than slightly overpaying.

I bought my first stock 21 years ago.

Here are 21 harsh investing truths I learned the hard way:

1: The worst mistake is to sell a mega-winner early 2: Humans are pre-programmed to be bad at investing.

3: Your personal finances are 10x more important than your investments.

4: Handle volatility is 100x easier in theory than in reality.

How to Read 10Ks Like a Hedge Fund

Here’s what metrics professional analysts focus on (using $MA as an example:) 1: Business overview.

Understand everything about how the business works, like:
- What is the business model?
- Who are the key suppliers, distributors, partners?
- Revenue quality?(Recurring? Recession proof?)
- What is the revenue split from products / services?

"I actually spend more time looking at balance sheets than income statements."

- Warren Buffett, 2025 Shareholder Meeting

Here's exactly how to analyze a Balance Sheet in less than 2 minutes: The balance sheet is one of the three major financial statements.

It shows a company’s:
▪️Assets: What it owns
▪️Liabilities: What it owes
▪️Shareholders Equity: It's net worth

At a fixed point in time

The most confusing term in accounting:

Stock-Based Compensation

How does it work? Why is it controversial?

Here’s a complete overview (in plain English): How can shareholders incentivize executives & employees to think & act like owners?

Stock-based compensation (SBC) has become the standard answer.

SBC pays executives and employees with stock instead of cash.

Charlie Munger HATED it.

John Malone LOVES it.

Most people have NO CLUE what it means.

What is EBITDA? Why is it important?

Here's everything you need to know about this controversial accounting term: EBITDA is an accounting term that is an alternative way to measure a company's profitability.

EBITDA is simply an acronym:

7 ridiculously simple money rules (that actually build wealth):

Rule #1 - The Tracking Rule Rule #2 - The Employer Match Rule

Warren Buffett's favorite book:

Securities Analysis by Ben Graham

Here are the most powerful lessons every investor should know: 1. Investing versus speculating

Investors make decisions based on the facts and value of the asset.

Speculators make decisions based on other participants' behaviors.

Know the difference:

10 handcrafted visuals by @safalniveshak every investor should see:

1. Stock Selection Framework @safalniveshak 2. Business Quality Growth Matrix

If you pick stocks, you MUST learn how to analyze a cash flow statement.

Here's how to do it in less than 2 minutes: The Cash Flow Statement shows how cash moves in and out of a company over a period of time.

Its purpose is to track cash movement through a business.

How to analyze an income statement in less than 2 minutes: The income sheet is one of the three major financial statements.

It shows a company’s:
▪️Revenue (Sales)
▪️Expenditures (Costs / Expenses)
▪️Net Income (Earnings, Profits)

Over a period of time.

Investing cheat code:

Steal ideas from the best investors.

Here's how to track what the top fund managers are buying and selling (for free): US Fund managers with >$100 million in assets must report their holdings quarterly to the SEC by filing a 13F.

Tracking these using the SEC is a pain, but @Finchat makes it easy

Here's how to find Warren Buffett's (Berkshire Hathaway) latest buys