The Lesson I Learned in Accounting School
Financial statements include lots of numbers. I learned how to read them in classes at Humboldt State. But I also learned about the stories they told.
An income statement will show you that a restaurant chain’s profit margins and same-store sales are rising. But it’s more interesting for readers to learn why. Consumers may be willing to pay higher prices for healthier food or more insight into suppliers’ ethical practices. They might pass up restaurants that don’t explain where they’re buying their food. It would be good to know that if you’re marketing to these diners.
Ever seen a technology company that’s cash-rich and earning high profits, but it trades at a low valuation? Investors might not believe that it can continue developing new products. Convincing them otherwise might change the value of the company even if its balance sheet stays the same.
Financial statements can also tell you about trust. Have you ever seen a company trading at a valuation that seems unusually low? It might be manipulating its reported earnings. On the other hand, an unusually high valuation may indicate that a company is reinvesting its profits, instead of returning them to investors. You need to consider multiple metrics to understand the complete story.
After I graduated, I continued to read financial statements, learning the stories of more companies every year. I’ve told these stories to other people and gotten paid for it. If you want to tell other people your company’s story, I can help you with that.