How much accounting knowledge is needed to read financial statements of publicly traded companies?
"I'm a senior majoring in accounting and management information systems. Here is a question I answered a while back about financial statements and employee retention. In the answer that I provided at the bottom it was to assess a company's ability to pay by use of ratios. Likewise, similar accounting methods need to be understood and implemented when assessing stocks(which is where I believe Mr. Buffet was going with this). As we can see the severity of the questions decreases, but if you can not answer question 3 then you should study accounting principles.   So how much is enough just to get started? You will never have enough knowledge to start, period. You will have to continuously be learning, so start sooner than later.  However you need neither economics or accounting knowledge if you were to learn technical analysis, many doubt the workings of this technique, but in my experience it is easier to learn and practise. A comment on @Veronica's post.  Understanding economics and accounting are fundamental. Analysis, seeing trends, and copying are instinctual human traits that helped us evolve (we are very good at pattern recognition). Taking an intro economic and accounting course at a local community college is an excellent place to start when breaking the mold of pattern-thinking. You have to be critical in understanding what elements move a company's A/R in the statement of cash flows. Read. Literally, don't stop reading. Latest edition of of Kesio's accounting principles? Read it. Cover to cover. Tax policies on Section 874, 222, 534? Read it.  Take a class, read a book, ask questions! Good Luck, ""Welcome to [the] Science [of Business], you're gonna like it here"" - Phil Plait" From my experience you don't need knowledge of accounting to pick good stocks. The type of investing you are referring to is fundamental. This is finding out about the company, this websites should help you start off: http://en.tradehero.mobi/how-to-choose-a-stock-fundamental-analysis/ Investopedia will also be a useful website in techniques. A bit of knowledge in economics will be helpful in understanding how current affairs will affect a market, which will affect stock prices. However you need neither economics or accounting knowledge if you were to learn technical analysis, many doubt the workings of this technique, but in my experience it is easier to learn and practise. For example looking at charts from previous years it shows the last time there was a huge recession the dollar did well and commodities didn't. In this recession we are entering you can see the same thing happening. Read about the different techniques before limiting yourself to just looking at financial statements you may find a better technique suited to you, like these technical analysts: http://etfhq.com/blog/2013/03/02/top-technical-analysts/ Hope this helps.
You won't be able to know the trading activity in a timely, actionable method in most cases. The exception is if the investor (individual, fund, holding company, non-profit foundation, etc) is a large shareholder of a specific company and therefore required to file their intentions to buy or sell with the SEC. The threshold for this is usually if they own 5% or greater of the outstanding shares. You can, however, get a sense of the holdings for some of the entities you mention with some sleuthing. Publicly-Traded Holding Companies Since you mention Warren Buffett, Berkshire Hathaway is an example of this. Publicly traded companies (that are traded on a US-based exchange) have to file numerous reports with the SEC. Of these, you should review their Annual Report and monitor all filings on the SEC's website. Here's the link to the Berkshire Hathaway profile. Private Foundations Harvard and Yale have private, non-profit foundations. The first place to look would be at the Form 990 filings each is required to file with the IRS. Two sources for these filings are GuideStar.org and the FoundationCenter.org. Keep in mind that if the private foundation is a large enough shareholder in a specific company, they, too, will be required to file their intentions to buy or sell shares in that company. Private Individuals Unless the individual publicly releases their current holdings, the only insight you may get is what they say publicly or have to disclose — again, if they are a major shareholder. "To expand on the above, go to the ""Investor Relations"" part of the website if they're public, and take a look at how they explain themselves to their shareholders. You'll learn a lot very quickly about everything you'd need for the interview." There are all sorts of topics in finance that take a lot of time to learn.  You have valuation (time value of money, capital asset pricing model, dividend discount model, etc.), financial statement analysis (ratio analysis, free cash flow &amp; discounted cash flow, etc.) , capital structure analysis(Modgliani &amp; Miller theories of capital structure, weighted average cost of capital, more CAPM, the likes), and portfolio management (asset allocation, security selection, integrates financial statement analysis + other fields like derivatives, fixed income, forex, and commodity markets) and all sorts.   My opinion of Investopedia is that there is a lot of wheat with the chaff.  I think articles/entries are just user-submitted and there are good gems in Investopedia but a lot of it only covers very basic concepts.  And you often don't know what you don't know, so you might come out with a weak understanding of something.    To begin, you need to understand TVM and why it works.  Time value of money is a critical concept of finance that I feel many people don't truly grasp and just understand you need some 'rate' to use for this formula.  Also, as a prereq, you should understand basics of accrual accounting (debits &amp; credits) and how the accounting system works.  Don't need to know things like asset retirement obligations, or anything fancy, just how accounting works and how things affect certain financial statements.  After that, I'd jump into CAPM and cost of capital.  Cost of capital is also a very misunderstood concept since schools often just give students the 'cost of capital' for math problems when in reality, it's not just an explicit number but more of a 'general feeling' in the environment.  Calculating cost of capital is actually often very tricky (market risk premium) and subjective, sometimes it's not (LIBOR based).    After that, you can build up on those basic concepts and start to do things like dividend discount models (basic theory underlying asset pricing models) and capital asset pricing models, which builds on the idea of cost of capital.    Then go into valuation.  Learn how to price equities, bonds, derivatives, etc.  For example, you have the dividend discount model with typical equities and perpetuities.  Fixed income has things like duration &amp; convexity to measure risk and analyze yield curves.  Derivatives, you have the Black-Scholes model and other 'derivatives' (heh) of that formula for calculating prices of options, futures, CDOs, etc.  Valuation is essentially taking the idea of TVM to the next logical step.  Then you can start delving into financial modelling.  Free cash flows, discounted cash flows, ratio analysis, pro forma projections.  Start small, use a structured problem that gives you some inputs and just do calculations.  Bonuses* would be ideas of capital structure (really not necessary for entry level positions) like the M&amp;M theorems on capital structure (debt vs equity), portfolio management (risk management, asset allocation, hedging, investment strategies like straddles, inverse floaters, etc), and knowledge of financial institutions and banking regulations (Basel accords, depository regulations, the Fed, etc.).    Once you gain an understanding of how this works, pick something out there and do a report on it.  Then you'll be left with a single 'word problem' that gives you nothing except a problem and tells you to find an answer.  You'll have to find all the inputs and give reasons why these inputs are sound and reasonable inputs for this analysis.    A big part that people don't understand about projections and analysis is that **inputs don't exist in plain sight**.  You have to make a lot of judgment calls when making these assumptions and it takes a lot of technical understanding to make a reasonable assumption--of which the results of your report highly depend on.  As a finance student, you get a taste for all of this.  I'm gonna say it's going to be hard to learn a lot of substantial info in 2 months, but I'm not exactly sure what big business expects out of their grunts.  You'll mostly be doing practical work like desk jockey business, data entry, and other labor-based jobs.  If you know what you're talking about, you can probably work up to something more specialized like underwriting or risk management or something else.   Source:  Finance degree but currently working towards starting a (finance related) company to draw on my programming background as well. "There are many different kinds of SEC filings with different purposes.  Broadly speaking, what they have in common is that they are the ways that companies publicly disclose information that they are legally required to disclose.  The page that you listed gives brief descriptions of many types, but if you click through to the articles on individual types of filings, you can get more info. One of the most commonly discussed filings is the 10-K, which is, as Wikipedia says, ""a comprehensive summary of a company's financial performance"".  This includes info like earnings and executive pay. One example of a form that some people believe has potential utility for investors is Form 4, which is a disclosure of ""insider trading"".  People with a privileged stake in a company (executives, directors, and major shareholders) cannot legally buy or sell shares without disclosing it by filing a Form 4.  Some people think that you can make use of this information in the sense that if, for instance, the CEO of Google buys a bunch of Twitter stock, they may have some reason for thinking it will go up, so maybe you should buy it too.  Whether such inferences are accurate, and whether you can garner a practical benefit from them (i.e., whether you can manage to buy before everyone else notices and drives the price up) is debatable. My personal opinion would be that, for an average retail investor, readng SEC filings is unlikely to be useful.  The reason is that an average retail investor shouldn't be investing in individual companies at all, but rather in mutual funds or ETFs, which typically provide comparable returns with far less risk.  SEC filings are made by individual companies, so it doesn't generally help you to read them unless you're going to take action related to an individual company.  It doesn't generally make sense to take action related to an individual company if you don't have the time and energy to read a large number of SEC filings to decide which company to take action on.  If you have the time and energy to read a large number of SEC filings, you're probably not an average retail investor.  If you are a wheeler dealer who plays in the big leagues, you might benefit from reading SEC filings.  However, if you aren't already reading SEC filings, you're probably not a wheeler dealer who plays in the big leagues. That said, if you're a currently-average investor with big dreams, it could be instructive to read a few filings to explore what you might do with them.  You could, for instance, allocate a ""play money"" fund of a few thousand dollars and try your hand at following insider trades or the like.  If you make some money, great; if not, oh well.  Realistically, though, there are so many people who make a living reading SEC filings and acting on them every day that you have little chance of finding a ""diamond in the rough"" unless you also make a living by doing it every day. It's sort of like asking ""Should I read Boating Monthly to improve my sailing skills?""  If you're asking because you want to rent a Hobie Cat and go for a pleasure cruise now and then, sure, it can't hurt.  If you're asking because you want to enter the America's Cup, you can still read Boating Monthly, but it won't in itself meaningfully increase your chances of winning the America's Cup." "If you are interested in a career in algorithmic trading, I strongly encourage you to formally study math and computer science.  Algorithmic trading firms have no need for employees with financial knowledge; if they did, they'd just be called ""trading"" firms.  Rather, they need experts in machine learning, statistical modeling, and computer science in general. Of course there are other avenues of employment at an algorithmic trading firm, such as accounting, clearing, exchange relations, etc.  If that's the sort of thing you're interested in, again you'll probably want a formal education in those areas as opposed to just reading about finance in the news. If you edit your question or add a comment below with information about your particular background, I could perhaps advise you in a bit more detail. ::edit:: Given your comment, I would say you have a fine academic background for the industry.  When hiring mathematicians, firms care most about the ease with which you can explore and extract features from massive datasets (especially time series) regardless of what the dataset might represent.  An intelligent firm will not care whether you arrive at their doorstep with zero finance knowledge; they will want to teach you everything from scratch anyway. Nonetheless, some domain knowledge could be helpful, but you're not going to get ""more"" of it from reading any mass market news source, whether you have to pay for it or not.  That's because  Some non-mass-market news sources in the industry are  These are subscription-only and actually discuss real information that real professional investors care about.  They are loaded with industry jargon, they're extremely opinionated, and (in my opinion) they're useless.  I can't imagine trying to learn about the industry from them, but if you want to spend money for news in order to be exposed to the innards of the industry, then either of these is far better than the Financial Times.  Despite requiring a subscription, the Financial Times still does not cover the technical details of professional trading. Instead of trying to learn from news, then, I would suggest some old favorites: and, above all else, Read everything in the navigation box on the right side under Financial Markets and Financial Instruments." "Publicly traded companies files 10-Ks with the SEC, searchable on the EDGAR system.  If you want basic financial statement info then look for 10-Ks that are marked ""Interactive Data"", as for those the SEC has  broken everything out by statement into standard formats.  You could also use marketwatch which puts everything in financial statements into the same or as similar of categories as it can to make it easier to compare companies." This is fine, but I'd probably spend a moment introducing WACC and it's estimation. It's also useful to link up the enterprise value to share price, so just also mentioning the debt subtraction to get equity value and division by shares for price.  Keep in mind you're usually given like a minute to answer this, so you can afford to be a bit more detailed in some parts. "The basic equation taught in day one of accounting school is that Assets = Liabilities + Equity. My first point was that I looked at the actual financial statements published as of the end of the 2nd quarter 2017, and the total liabilities on their audited balance sheet were like $13 billion, not $20b. I don't know where the author got their numbers from.  My second point: Debt usually needs to be paid on prearranged terms agreed upon by the debtor and the debtee, including interest, so it is important for a business to keep track of what they owe and to whom, so they can make timely payments. As long as they have the cash on hand to make payments plus whatever interest they owe, and the owners are happy with the total return on their investment, then it doesn't really matter how debt they have on the balance sheet.  Remember the equation A=L+E. There are precisely two ways to finance a business that wants to acquire assets: liabilities and/or equity. The ""appropriate"" level of debt vs equity on a balance sheet varies wildly, and totally depends on the industry, size of the business, cash flow, personal preferences of the CEO, CFO, shareholders et al, etc.    It gets way more detailed and complicated than that obviously, but the point is that looking at debt alone is a meaningless metric. This is corporate finance and accounting 101, so you can probably find tons of great articles and videos if you want to learn more." They don't need to know how to actually write code, but they should understand the process of writing code. I don't expect a CEO to understand each line in the chain of the distribution centers but I do expect them to understand the process enough to make a logical decision.  CEO's don't need to be able to write code, but they should understand what it takes to get that code to a production environment and what risks are involved with different types of code pushes. Thanks for your thorough reply.   Basically, I found a case study in one of my old finance workbooks from school and am trying to complete it.   So it's not entirely complicated in the sense of a full LBO or merger model.   That being said, the information that they provide is Year 1 EBITDA for TargetCo and BuyerCo and a Pro-Forma EBITDA for the consolidated company @ Year 1 and Year 4 (expected IPO). I was able to get the Pre-Money and Post-Money values and the Liquidation values (year 4 IPO), as well as the number of shares.   I can use EBITDA to get EPS (ebitda/share in this case) for both consolidated and stand-alone @ Year 1, but can only get EPS for consolidated for all other years. Given the information provided. One of the questions I have is do I do anything with my liquidation values for an accretion/dilution analysis or is it all EPS? I work in corporate finance at a large bank. Here's my opinion.  I'd say learn SQL, Tableau, and OBIEE first in that order.   I do know Java but have never personally used it at work. I know some people that do and Java is usually the language of choice for banks. It's really good to know but it's rare that a company would expect an accounting or finance person to use it.  But almost every team in corporate finance will use at least one of the other three. Most finance / accounting people don't take the time to learn these. So most teams have one or two hot shots that do most of the work.  Also, you can learn those three easily over the summer if not sooner. They aren't very difficult. Java is more complicated so maybe take your time learning that after the other ones. "Good ones, no there are not.  Go to a bookstore and pick up a copy of ""The Intelligent Investor.""  It was last published in 1972 and is still in print and will teach you everything you need to know.  If you have accounting skills, pick up a copy of ""Security Analysis"" by Benjamin Graham.  The 1943 version was just released again with a 2008 copyright and there is a 1987 version primarily edited by Cottle (I think).  The 1943 book is better if you are comfortable with accounting and the 1987 version is better if you are not comfortable and feel you need more direction. I know recent would seem better, but the fact that there was a heavy demand in 2008 to reprint a 1943 book tells you how good it is.  I think it is in its 13th printing since 2008.  The same is true for the 72 and 87 book.  Please don't use internet tutorials.  If you do want to use Internet tutorials, then please just write me a check now for all your money.  It will save me effort from having to take it from you penny by penny because you followed bad advice and lost money.  Someone has to capture other people's mistakes.  Please go out and make money instead.   Prudence is the mother of all virtues." If you are refering to company's financial reports and offerings, the required source for companies to disclose the information is the SGX website (www.sgx.com) under the Company Disclosure tab.  This includes annual statements for the last 5 years, prospectus for any shares/debentures/buy back/etc which is being offered, IPO offers and shareholders meetings. You may also find it useful to check the Research section of the SGX website where some of the public listed companies have voluntarily allowed independent research firms to monitor their company for a couple of years and produce a research report. If you are referring to filings under the Companies Act, these can be found at the Accounting and Regulatory Authority (ACRA) website (www.acra.gov.sg) and you can also purchase extracts of specific filings under the ACRA iShop. To understand the Singapore public listing system and the steps to public listing, you may find it useful to purchase one of the resource documents available for Singapore law, finance, tax and corporate secretaryship which are sold by CCH (www.cch.com.sg). Specifically for public listing the Singapore Annotated Listing Manual may help.  It is common practice for companies here to employ law firms and research firms to do the majority of this research instead of doing it themselves which I one of the reasons this information is online but perhaps not so visible. I hope I have understood your question correctly! The websites of the most publicly traded companies publish their quarterly and annual financials.  Check the investor relations sections out at the ones you want to look at. There are some economic signs as there are in all economic and business cycles, such as interest rates rising. However, a more effective way is to actually look at price action itself. The definition of an uptrend is higher highs followed by higher lows. The definition of a downtrend is lower lows followed by lower highs. So if you are looking to invest for the long term you can look at the weekly or even the monthly chart of the market say over the past 10, 15 or 20 years. Using these definitions on say the S&P500 if the price continues to make higher highs and higher lows then stay in the market. If the price makes a lower high than the previous high, then this is a warning sign that the trend may be about to end. The trend has not broken yet but it is a warning sign that it could be ending soon. If the price makes a higher low next followed by a higher high, then the trend continues and you just need to keep an eye on things. If, however, the price makes a lower low after the lower high this is a signal that the uptrend is over and you should get out of the market. If the price makes a lower low directly after a higher high, then be cautious and wait for confirmation that the uptrend is over. If you then get a lower high this is confirmation that the uptrend is over, you would then sell if prices drop below the previous low. If you invest in individual shares then you should keep an eye on the charts for the index and individual shares as well. The index chart will give you an indication if the uptrend is over for the whole market, then you can be more cautious in regards to the individual shares. You can then plan exit points on each individual share if their trends are broken too. If you have stop losses employed and the trend reverses on the index, this would be a good time to tighten your stop losses on individual shares. You can then buy back into the market when you determine that the downtrend is broken and prices start to show higher highs and higher lows again. Will there be occasions when the uptrend reverses and then after a short period starts trending up again, yes there might be, but the worse that will happen is that you pay a bit of extra brokerage to get out and then back into the market, and you might have to pay some capital gains tax on any profits made. But remember no one ever went broke making a profit. The most important thing to remember when investing is to conserve and protect your capital. I would rather pay some extra brokerage and some capital gains tax than see my portfolio drop by 50% or more, then take 5 years or more to recover. And remember, paying tax is a good thing, it means you made money. If you don't want to pay any tax it means you will never make any profits, because if you make profits you will have to pay tax one day.