Reading a balance sheet and income statement: margins, ratios, trends and notes
For bookkeepers, finance assistants, credit controllers, buyers checking a supplier and managers who are handed a company's financial statements and need to read them properly. Prerequisite: 'Reading the income statement and balance sheet', which covers what each statement shows and why profit isn't cash. This course goes further, with two years of statements: margins and earnings per share, liquidity (working capital, current and quick ratios), solvency (debt-to-equity and times interest earned), horizontal and vertical (common-size) analysis, and using the footnotes and MD&A to explain what changed. Terms and examples follow US usage (the SEC's Beginners' Guide to Financial Statements). This course does not grant an accounting qualification and is not investment, credit or legal advice: your finance team's or lender's definitions and thresholds apply.
- Level
- Intermediate
- Length
- About 92 minutes
- Contents
- 5 lessons · final exam
- Status
- Published · updated 10 Oct 2026
Skills you'll practise
- Calculate gross profit, income from operations, net income, margins and EPS from a multi-step income statement
- Classify balance sheet items as current or noncurrent and calculate working capital, the current ratio and the quick ratio
- Judge solvency by calculating debt-to-equity and times interest earned
- Compare two years with horizontal and vertical (common-size) analysis and choose which lines to investigate
- Use the footnotes and MD&A to explain changes that the figures alone can't
Course outline
- 1.Calculating gross profit, income from operations, net income, margins and EPS from a multi-step income statementLesson · 18 min
- 2.Classifying current and noncurrent items and calculating working capital, the current ratio and the quick ratioLesson · 18 min
- 3.Judging solvency by calculating debt-to-equity and times interest earnedLesson · 16 min
- 4.Comparing two years with horizontal and vertical (common-size) analysisLesson · 18 min
- 5.Using the footnotes and MD&A to explain changes that the figures alone can'tLesson · 14 min
- 6.Reading a balance sheet and income statement: margins, ratios, trends and notes: knowledge checkKnowledge check · 13 questions
- 7.Reading a balance sheet and income statement: margins, ratios, trends and notes: practical exerciseKnowledge check · 1 question
- 8.Final exam10 questions · passing it completes the course, so people who already know the material can test out
Sources it draws on
The lessons and questions are written from these references, so learners can go back to the original.
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