How the statements fit together and the ratios used to read them, each with a worked example.
Learn the cash conversion cycle formula, calculate DIO, DSO, and DPO step by step, and interpret positive or negative results.
A balance sheet is a snapshot of what a business owns, owes, and the owners' claim at one date. See the classified layout, a worked example, and how to read it.
The allowance for doubtful accounts is a contra-asset that estimates uncollectible receivables. See the estimate, write-off, and recovery entries with full math.
The cost of goods sold formula is beginning inventory plus purchases minus ending inventory. Worked example with freight-in, gross profit, and the ending-inventory trap.
The current ratio formula is current assets divided by current liabilities. Work through a full example and learn how to judge whether a current ratio is good.
The debt to equity ratio is total liabilities divided by shareholders' equity. Work through the formula, a two-firm example, and what counts as a good ratio.
DuPont analysis splits ROE into net profit margin, asset turnover, and equity multiplier. Two worked examples show whether returns come from profit, efficiency, or debt.
The EBITDA formula two ways: net income plus interest, taxes, depreciation, and amortization — or operating income plus D&A. One worked example computes both builds.
The free cash flow formula is operating cash flow minus capital expenditures. See where each input sits on the cash flow statement, plus the FCFF and FCFE variants.
Net working capital is current assets minus current liabilities. See the formula, the operating variant, and a worked example of the change in NWC and its cash effect.
The quick ratio tests whether a company can pay its current liabilities without selling inventory. Both formulas, a worked example, and when it beats the current ratio.
The retained earnings formula: ending balance = beginning retained earnings + net income − dividends. A three-year worked roll-forward, including a loss year.
The indirect method builds the statement of cash flows from net income, adding back non-cash expenses and adjusting for working-capital changes. Worked example inside.
An income statement reports revenues minus expenses over a period. See the multi-step format built line by line, with a worked example and the margins to read from it.