Understanding Financial Statements

Warm-up: Your 90-second briefing

2 warm-up questions

• Who asks you about numbers at work — a manager, a client, your team? What do they actually want to know?
• First try: how did your company (or any company you know) do last year? Tell me in 30 seconds — use any numbers you remember.

Reading: What your manager is really asking

Read a 145-word text about What your manager is really asking

What your manager is really asking When a manager, client or colleague says "so, how are we doing?", they are not asking you to read the accounts aloud. They're testing three things: can you choose the numbers that matter, can you translate them into plain English, and do you know why they moved. The three financial statements each answer one human question. The income statement: are we making money? The balance sheet: what do we own and owe? The cash flow statement: is cash actually arriving? A good briefing pulls one headline from each — not thirty lines from one. The classic failure is the accounting lecture: defining every term, listing every figure, and never reaching a verdict. By the end of this lesson you'll do the opposite — a 90-second briefing that ends with one sentence your listener can repeat in their next meeting.

Vocabulary: Financial Vocabulary

8 items

Framework: The Health Check

The Health Check, 4 steps

The Health Check: A 90-second briefing on any company's results — four moves, each one number deep, ending in a verdict your listener can repeat.

Reading: Three model briefings

Read a 330-word text about Three model briefings

Three model briefings The same four moves — top line, bottom line, cash, verdict — from three very different people. Each is about 90 seconds spoken, and each ends with a sentence the listener can repeat. The marketing manager (briefing her team on the annual results) "Quick version of the annual results, because they affect our budget. Revenue came in at $4.2 million, up roughly 12% on last year — the top line is genuinely strong. Net profit fell by 3%, though, and the main driver was overhead — which is why every department is being asked about costs. Cash is fine: cash flow from operations improved, so nobody should panic. Overall, it looks like a growing company tightening its belt — expect harder questions about spend, not hiring freezes." The accountant (translating for a non-financial founder) "Here's your year in three numbers. The top line first: sales rose to €310,000 — up roughly a quarter on last year, and the new shop drove most of that. Bottom line: profit was €38,000, slightly down on last year, because the shop fit-out costs all landed this year — it looks like a one-off rather than a trend. The number I want you to watch is cash: customers are paying you 20 days late on average, so you're profitable on paper, but cash is tight. Overall, the data suggests a healthy business that needs to chase its invoices." The job candidate (asked what they know about the company) "I had a look at your latest annual report. Revenue came in at just under $80 million, up roughly 8%, with most of the growth coming from the subscription side. Net profit improved faster than revenue — margins went from 14% to 18% — which suggests the cost base is under control. And you're generating cash from operations, which isn't true of every company in this sector. Overall, it looks like a business that's growing carefully — honestly, that's part of why I applied."

Practice: Financial Reporting Phrases

Gap-fill exercise, 5 items

• Total ____ for the quarter reached $4.2 million, up 12% year-over-year.
• Our gross profit ____ improved from 35% to 42% thanks to lower production costs.
• We need to reduce ____ costs to improve our bottom line.
• The balance sheet shows total ____ of $8 million and liabilities of $3 million.
• Cash ____ from operating activities was positive for the third consecutive quarter.

Practice: Fix the Financial Sentences

Error-correction exercise, 5 items

• The company has a lot of debts in their liabilities.
• Our revenue is more bigger than last year.
• The cash flow is going down since three months.
• We made a profit of net $2 million.
• The assets of company are worth $10 million.

Dialogue: Discussing the Annual Report

Role-play: You're reviewing the company's annual report with a colleague and discussing key findings. (3 lines)

• I've just looked at the annual report. What stood out to you? Highlight the most notable figures, using financial vocabulary from this lesson.
• What about the balance sheet? Anything interesting there? Comment on assets and liabilities using proper financial terms.
• Is there any good news in there? Focus on the cash flow improvement and explain why it matters.

Discussion: Your mission: brief the manager

3 discussion questions

• Mission: brief me on a company YOU know — your employer, a former employer, or a company you follow. Top line, bottom line, cash, verdict, in about 90 seconds. Success = three numbers (rough is fine), one 'the main driver was...', and a one-sentence verdict I could repeat. (Tutor: play the manager, time it, and ask one follow-up.)
• Second take: your manager interrupts — 'Wait, if we're profitable, why are you worried about cash?' Explain the difference in two sentences, using this company's situation.
• Compare this with your 30-second version from the start of the lesson. Which of the four moves was missing then — and which number will you always lead with now?