Read an excellent article by Gannon on investing: What Is The Best Way and How to Learn Accounting_Gannon
Books on how to learn Accounting
So now I will give you a few links to various books on How to Learn Accounting and financial statement analysis. Contradictory? Certainly, read Earnings Quality and glance at the other books, but the above statement still holds–you must actively go through annual reports and 10-Ks on your own with your accounting books at your side for reference. Try to read the story that the numbers are telling you. When stuck, look up the concepts in several reference books, then go back. If still unclear, make a note of the reference/word/concept and move on until you can go back again with more knowledge. Little-by-little the bird builds his nest.
Quality of Earnings (Rec. by Joel Greenblatt): hightail
Case Study on Earnings Quality: hightail
Just remember to not lose sight of the overall picture. A company may be undervalued and have an excellent business but you are put off by a certain aspect of how the company capitalizes investments. so keep everything in perspective.
This lecture focuses on the balance sheet and how to spot warnings.
Go here to download the lecture: Lecture-11-Balance-Sheet-Analysis-Duff-Phelps-ROE-vs-ROC
The Professor and Great Investor (“GI”) in this 11th lecture recommends two books to learn how to read a financial statement.
- The First book is Ben Graham’s: Interpretation of Financial Statements (Basic) : Interpretation_of_Financial_Statments
- The second book is Thornton O’Glove’s Quality of Earnings which has good case studies (recommended).
You will need to reach an intermediate level of accounting knowledge to be firmly grounded. You can take classes at a community college or you can read beginning and intermediate accounting textbooks, but you need to have the particular text’s student guide to work the accounting problems or else you will not grasp all the concepts.
The two best books (I have found) for corporate finance and Financial Statement Analysis are:
1. Analysis for Financial Management by Robert C. Higgins (Corporate Finance)
The Student Guide How to Learn Accounting for your review and preview is here: highered.mcgraw-hill.com
2. Financial Statement Analysis and Security Analysis by Stephen N. Penman is excellent though the acronyms I found difficult at first. Make sure you have the edition that corresponds to the Student Guide so you can work out the problem sets found here: highered.mcgraw-hill.com
And to be posted later…..
You can also go to short-seller blogs that have many examples of their work for you to study.
An Australian Hedge Fund manager who has been uncovering Chinese Frauds and whom you can learn from is here: brontecapital (an excellent blog).
I recommend that you download their reports and also download the 10-K or annual report of the company mentioned in the research report (and year corresponding to the date of the research report). Try to critique the research report; can you follow the analysis from reading the financial statements yourself?
You will be learning from skilled professionals with a fairly decent track record. Yes, it is a bit of work to download 10-Ks, research reports, and then read several thousands of pages, but you will learn as long as you have a basic understanding of financial statement analysis.
You will know the strengths and weaknesses of financial statements, how to spot frauds and how to convert accounting numbers into useful information to find bargains or avoid blow-ups.
……….be persistent and patient.
How to Learn Accounting Via CSInvesting