Free course · Earnings · Beginner
Ten-Q Very Much: Reading Earnings Reports and Financial Statements
Reading financial statements takes a filing, a calculator and some patience. The course works through the statements inside a Form 10-Q and the earnings release that comes before it, with hypothetical figures you can check by hand.
Who it is for
Traders and investors who read the earnings headline and want to read the financial statements underneath it.
By the end you can
- Walk an income statement from revenue to diluted earnings per share and work out each margin on the way
- Check a balance sheet balances and read the current ratio and debt to equity off it
- Rebuild operating cash flow and free cash flow from net income, and spot when cash and earnings split apart
- Read an earnings release in order, reconcile adjusted figures to GAAP and turn a guidance range into implied growth
The lessons
- I The Income Statement, From Revenue Down to Earnings Per Share
How to read an income statement line by line: revenue, gross profit, operating income, interest, tax and net income, down to basic and diluted EPS.
About 14 minutes, with a quiz at the end
- II The Balance Sheet: What a Company Owns, Owes and Keeps
How to read a balance sheet in a 10-Q: assets, liabilities and equity, the current ratio, debt to equity, and the lines worth comparing between quarters.
About 13 minutes, with a quiz at the end
- III The Cash Flow Statement: Where the Cash Actually Went
How to read a cash flow statement: operating, investing and financing cash flows, the path from net income to free cash flow, and when earnings and cash split apart.
About 13 minutes, with a quiz at the end
- IV Reading an Earnings Release and Its Guidance Line by Line
How to read an earnings release in order: the Form 8-K filing, headline figures, the non-GAAP reconciliation, segments, cash flow and the guidance range.
About 12 minutes, with a quiz at the end
Beat on earnings, light on revenue, guidance cut. That’s how most traders meet a quarter, as a headline on a screen, and by the time anyone opens the filing the stock has usually moved. The headline is a summary written by the company. Underneath sit the statements the company files with the SEC. They carry the detail the summary left out.
The course is for anyone who reads that headline and wants to read what sits under it. No accounting background is assumed. You need subtraction and division. You also need the patience to check a sum instead of trusting it.
What to have ready
Pick a company you follow. Pull its latest quarterly report on Form 10-Q and its most recent earnings release, both free on the SEC’s EDGAR system, and note the date on each, because the release usually comes out first and the 10-Q follows, sometimes by several weeks. The 10-Q holds the condensed financial statements, their notes and management’s discussion of the quarter; the release is the shorter document the company puts out on results day.
Keep both open while you work.
Every lesson uses a hypothetical company with round figures, and every step is shown, so you can follow the arithmetic on paper and then find the same line in your own company’s filing. That second step is where the reading sticks.
How to work through it
Take the lessons in order. Each statement builds on the one before: the income statement produces net income, the balance sheet records where the company stands at quarter end, the cash flow statement explains how the cash balance got from one balance sheet to the next, and the earnings release pulls the lot into a few pages with the company’s own choice of emphasis. Skipping ahead to the release works. The reconciliation tables and guidance ranges just read better once the statements are familiar.
Each lesson ends with a short quiz.
Answer it before reading the explanations. A wrong answer usually points to one misread line. Go back to that line in your own filing.
What the course leaves out
Valuation is outside the scope: no discounted cash flow models, no price targets. Accounting standards come up only where they change what you see on the page. Banks and insurers are also left aside, because their statements are built differently, with interest income and loan losses where other companies have revenue and cost of goods sold. The concept page on net interest margin is a start on how banks earn.
Where to go after
Once the statements read easily, the column arguing that operating margin is the line worth reading first makes a case for where to look when time is short. The answer on why revenue can grow while profit falls works through the most common gap between the top and bottom lines, and the profit margin calculator runs gross, operating and net margin on any figures you pull from a filing. The earnings section collects the rest.
Readers also ask
Where can I find a company's 10-Q for free?
The SEC's EDGAR system holds every public company's filings at no cost. Search for the company, filter by form type and you will find each quarterly 10-Q, the annual 10-K and the 8-K filings that carry earnings releases. Most companies also post the same documents on the investor relations section of their own website.
Do I need an accounting background to read financial statements?
No. You need to add, subtract and divide, and to know what each line is measuring. The statements follow a fixed order, and once you can walk the income statement from revenue down to earnings per share, the balance sheet and cash flow statement read the same way: one line at a time, each tied to the next.