Understanding of financial reports is very important for an investor. Its not easy for a person of non-finance background to decipher the financial numbers. Many times what numbers says is not correct. There are so many books on accounting but How to Read a Financial Report: Wringing Vital Signs Out of the Numbers By John Tracy is the best for beginners
Recently I read it and I believe this is the most easy to understand book to learn about financial reports. This is a very focused no stories it just talks about the things which you need to learn in a very simple easy to understand way. This book is just clear, straightforward, uncomplicated, and unambiguous. Its explanations are methodical and detailed. If you are unclear about how financial statements are intertwined or simply have some unanswered questions then you need this book.
Author starts with introducing cash flow and then talks about Profit and loss statement, balance sheet in detail. The connection between balance sheet, income statement and cash flow statement their interconnection is nicely explained. How a change in one thing can bring change in other things in the statement is well explained. Each component of income statement and balance sheet is discussed in detail.
Some important financial ratio and their importance in fundamental analysis are also covered. He also talked about the possible manipulation that can be done in the reports and how to find them out. I would recommended this book to everyone who is struggling with understanding the concepts.
Abhishek is an Engineer MBA in Finance and Certified Research Analyst. He is an active trader and investor in the stock market since 2010. Follower of the philosophies of Warren Buffet and Peter Lynch in investing and trend following in trading.