How to sharpen your financial acumen

This week we are looking at 1 tip to sharpen your financial acumen.

Spoiler: It’s READING

No, not a book. Financial statements.

Readily available online you can access financial statements from any public company or any company that issues bond (hello health systems).

So, today, we are going to share why this helps, how you want to approach it, and where to find them.

Why

The why is simple, the more you are familiar with financial statements, the better you are going to be at integrating finance into your business and perspectives.

Financials give you insight into how a business is performing, areas of opportunities, and a starting point to understand areas you may not be familiar with. The last point is really where the magic happens and underpins the first two.

When you spend time perusing a company’s financial statements, you start to see businesses differently and begin to approach your own in a different way as well.

How

This section could be it’s own book. In fact you can spend tens of thousands of dollars at a university dedicated to how to read financial statements. But we only have about 2 minutes, so this is going to be a meta version of how.

The way you want to approach reading financial statements is one of pure curiosity. There may be numbers you don’t understand, terms you have never seen before, and connections that make no sense. Great, there is the learning opportunity.

When looking through a 10K (that’s a company’s annual financial statement) start by reading top to bottom. The company has spent a significant amount of time and money to tell you all about their organization and exactly why their performance looks the way that it does.

Either as you read or after, pull out your handy friend Google or AI tool de jour (fancy Google) as search away for the things you come across and think either, “what does that mean?” or, “where does that number come from?”

What’s a reverse business combination?
What are deferred inflows of resources?
How can you have a negative shareholder’s equity?
Is having more debt than assets always a bad thing?
How come when Accounts Payable increases, cash decreases?

The list goes on.

But just like if you needed to learn Portuguese by watching Sesame Street and pausing it every 12 seconds to look up a word, rewinding to rewatch the segment, and then carrying on, this exercise works the same way.

The process is first familiarize, then fill in understanding gaps, start making connections, and finally glean insights from the finances.

And just like anything, the trick is starting and remaining consistent. The good news is there is no shortage of financial statements out in the world and between them all and shareholder letters from great CEOs, you will never need to go get an MBA.

Where

Public companies are easy. Just type: “[Company name] financial statements” into Google.

You can also type in [Company name] investor relations.

If you are into health system financials, it’s a little trickier. But here’s the process:

Start with Google and see what you come up with. Same as above, type: “[Health system name] financial statements.”

You will usually get their financial assistance policies, but some of the larger systems have annual statements available.

Here’s the pro method:

Navigate to: https://emma.msrb.org/

Search for the health system you are interested in.

Select the one that is closest to what you are looking for. These will often be state dependent and not be completely clear, so you may need to do some clicking. Your best bet is to find revenue bonds.

Once you have found the right one, navigate to Continuing Disclosures and voila! A buffet of financial information.

Now, go forth and read on!

Wrapping up

Building your financial acumen doesn’t need to happen over the course of multiple semesters after cutting checks for thousands of dollars. You don’t even need a text book. Just an internet connection and search engine. It can happen over a couple of hours on your own following your curiosities and applying them to your business.

Spending time reading other company’s financials will give you a deeper understanding and different perspective for how to approach your practice’s financials.

Disclaimer: The content provided is intended for educational purposes only and does not constitute financial or legal advice. This content is not intended to create, and receipt of the newsletter does not constitute, an attorney-client relationship. While efforts have been made to ensure the accuracy of the information presented, it may not necessarily reflect the most current legal developments or regulations and does not provide a complete representation of all associated legal and compliance considerations for any given topic. Therefore, readers are encouraged to seek professional legal advice or consult with appropriate professionals regarding specific legal issues or concerns related to their individual circumstances.