Company Financials and Valuation
A stock is a claim on a business's cash. Learn to open the books, see how the three statements interlock, and put a defensible price on the whole thing — from balance sheet to a full DCF.
How to read a business and price it. The three financial statements (balance sheet, income statement, cash-flow statement) and how they lock together, margins and ratios (ROE, debt/equity, ROIC), earnings and EPS, valuation multiples (P/E, EV/EBITDA, P/B), discounted cash flow step by step, growth versus value, and the accounting red flags that separate real earnings from cosmetics.
You can buy a stock by tapping a green button and never asking what you actually bought. But a share is a claim on a business — its assets, its debts, and above all its future cash. The investors who consistently win don’t guess at price charts; they open the books, work out what the business earns and owns, and decide what that stream of cash is worth today. This course teaches that craft, from the first line of a balance sheet to a complete discounted-cash-flow valuation.
We build it brick by brick. This course covers:
- The three statements — the balance sheet (what a company owns and owes at a moment), the income statement (what it earned over a period), and the cash-flow statement (where the cash actually went) — and the iron identities that govern each.
- How the three link — net income flows into retained earnings, the cash-flow statement reconciles profit to cash, and every change on one statement echoes on the others. Break one and the model won’t balance.
- Margins, ratios and EPS — gross/operating/net margins, return on equity decomposed by DuPont, debt/equity and interest coverage, and exactly what “earnings per share” counts (and quietly leaves out).
- Valuation multiples — P/E, EV/EBITDA and P/B: what each compares, why enterprise value beats market cap for leveraged firms, and how to read a multiple without being fooled by one.
- Discounted cash flow — projecting free cash flow, discounting it at the cost of capital, the terminal value that dominates the answer, and a sensitivity table that shows how fragile the “precise” number really is.
- Growth vs value, and red flags — the two great investing styles, and the accounting tricks — channel stuffing, capitalised costs, ballooning receivables — that make weak businesses look strong.
By the end you won’t just own shares — you’ll be able to read a company’s filings, compute what the business is worth, and explain in numbers why the market price is fair, cheap, or a trap.
In this topic
- 1 The Balance Sheet — What a Company Owns and Owes The financial photograph: assets, liabilities and equity, the accounting identity that can never break, current vs non-current, working capital, book value, and why a balance sheet is a snapshot in time — not a movie. 16 min
- 2 The Income Statement — What a Company Earned The profit movie: revenue down to net income, the difference between gross, operating and net profit, COGS vs operating expenses, depreciation, the line between operating and non-operating items, and why profit is an opinion while cash is a fact. 16 min
- 3 The Cash-Flow Statement — Where the Money Actually Went Profit is an opinion; cash is a fact. The three sections — operating, investing and financing — how net income is reconciled to real cash, free cash flow, why a profitable company can go bust, and reading the cash statement to catch what the income statement hides. 16 min
- 4 How the Three Statements Lock Together The three statements are one model. Net income flows into retained earnings, the cash-flow statement reconciles profit to the cash line, every balance-sheet change has a flow behind it, and the whole thing must tie out — break one link and the model won't balance. 15 min
- 5 Ratios, Margins and EPS — Turning Statements into Judgments Profitability ratios (ROE, ROA, ROIC) and the DuPont decomposition, leverage and coverage ratios (debt/equity, interest coverage), efficiency ratios, earnings per share — basic vs diluted — and how ratios turn raw statements into comparable judgments about quality. 18 min
- 6 Valuation Multiples — P/E, EV/EBITDA and P/B Relative valuation: the P/E ratio and the earnings yield, why enterprise value beats market cap for leveraged firms, EV/EBITDA as the capital-structure-neutral workhorse, price-to-book and where it shines, the PEG ratio, and how to read a multiple without being fooled by one. 18 min
- 7 DCF Valuation, Step by Step Absolute valuation from scratch: a company is worth the present value of its future free cash flows. Projecting FCF, choosing a discount rate (WACC), the terminal value that dominates the answer, summing it all, and a sensitivity table that shows how fragile a 'precise' DCF really is. 20 min
- 8 Growth vs Value, and the Red Flags That Catch Frauds The two great investing styles — growth and value — and what each really bets on, plus the accounting red flags that separate real earnings from cosmetics: the cash-vs-profit gap, ballooning receivables and inventory, capitalised costs, serial one-offs, and aggressive revenue recognition. 18 min
- 9 Final Exam: Company Financials and Valuation The graded final exam for Company Financials and Valuation: the three statements and how they link, margins and ratios (ROE, DuPont, coverage), EPS, valuation multiples (P/E, EV/EBITDA, P/B), DCF valuation, growth vs value, and accounting red flags. 18 min
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