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Reading Financial Statements
The Story Behind the Numbers. Post #26
Mort Greenberg
November 30, 2025
In Partnership with Boostr: The Purpose-built platform by media pros to power the future of ad sales
Good morning,
Every financial statement tells a story about how a company earns money, spends it, and grows it. When you know how to read that story, you stop guessing about performance and start predicting it.
For sellers, that means you can position your solutions in the context of business outcomes. For managers, it means you can measure performance and make resource decisions with confidence. For business owners, it means you can spot risks and opportunities before anyone else does.
Financial literacy is a superpower. It helps you see beyond marketing headlines, balance growth against cost, and understand what truly drives value creation. It allows you to talk with CFOs and CEOs in their language, the language of numbers, margins, and cash flow, which builds credibility instantly.
Turn to Best View Tables Below
DEFINITIONS
Term / Concept | Definition |
P&L (Profit & Loss Statement) | A report showing revenues, expenses, and profits over a specific period, also known as the income statement. |
Balance Sheet | A snapshot of what the company owns (assets), owes (liabilities), and retains (equity) at a given time. |
Cash Flow Statement | A report showing how money moves in and out of the business through operations, investments, and financing. |
COGS (Cost of Goods Sold) | The direct costs of producing goods or services sold by a company. |
Gross Margin | The percentage of revenue that remains after subtracting COGS, a key measure of efficiency. |
EBITDA | Earnings Before Interest, Taxes, Depreciation, and Amortization, a measure of core operational profitability. |
Working Capital | Current assets minus current liabilities, a measure of liquidity and operational health. |
TEST YOUR KNOWLEDGE
Question | Format | Answer Key |
1. What does a company’s balance sheet show? | A) Profit over time B) Assets, liabilities, and equity C) Marketing spend D) Revenue per region | B |
2. A company can be profitable on its income statement but still run out of cash. | True/False | True |
3. Name one reason why cash flow is often more important than profit. | Short Answer | Example: “Cash flow shows whether the company can actually pay its bills and sustain operations.” |
DO’S AND DON’TS
Do’s | Don’ts |
Do connect financial results to business performance, not just numbers. | Don’t look at a single report in isolation, always analyze trends. |
Do focus on what’s driving profitability, not just top-line growth. | Don’t confuse revenue growth with financial health. |
Do ask “why” behind the numbers to find the story. | Don’t assume accounting terms mean the same thing in every company. |
THE WORKSHOP > 3 MODULES
MODULE 1: THE INCOME STATEMENT. SEEING THE FLOW OF PROFIT
OBJECTIVE: Learn how to read and interpret a company’s P&L to understand how it makes money, manages costs, and drives profitability.
Simplified P&L Statement (in $000s) | Revenue | COGS | Gross Profit | Operating Expenses | Net Income |
Q1 20xx | $1,000 | $600 | $400 | $300 | $100 |
TIPS
Track gross margin trends, rising or falling margins tell you where efficiency gains or leaks are happening.
Ask, “Are expenses scaling faster than revenue?”
Tie net income back to operational effectiveness, not just sales volume.
CASE STUDY: A marketing services firm increased revenue by 25% but saw profit decline. A P&L review revealed rising freelance costs and underpriced packages. After repricing contracts and optimizing project staffing, net income improved 15% within two quarters.
DISCUSSION QUESTIONS
Question | Answer |
1. Why can rising revenue still lead to lower profit? | Costs may increase faster than sales or margins may shrink. |
2. What’s the most valuable insight from a P&L? | Whether the business model is profitable and scalable. |
3. How can sellers use P&L insights? | To align their pitch with the customer’s profit goals. |
MODULE 2: THE BALANCE SHEET. MEASURING STRENGTH AND STABILITY
OBJECTIVE: Understand how to read a balance sheet to assess a company’s financial position, risk, and resilience.
Simplified Balance Sheet (in $000s) | Assets | Liabilities | Equity |
End of Q2 20xx | $5,000 | $3,000 | $2,000 |
TIPS
Look for balance between short-term assets and liabilities, healthy working capital indicates flexibility.
High debt may signal growth investment or financial strain, context matters.
Compare year-over-year changes to spot trends in leverage and liquidity.
CASE STUDY: A manufacturing company appeared profitable but struggled to meet payroll. A deeper look at its balance sheet showed high receivables and low cash. Tightening payment terms improved liquidity by $500K in 90 days and stabilized operations.
DISCUSSION QUESTIONS
Question | Answer |
1. Why is the balance sheet called a “snapshot”? | It captures the company’s financial health at a single point in time. |
2. What does a high debt-to-equity ratio signal? | Potential financial risk or aggressive expansion. |
3. Why should business owners track working capital? | It indicates whether day-to-day operations are sustainable. |
MODULE 3: THE CASH FLOW STATEMENT. FOLLOWING THE MONEY
OBJECTIVE: Learn how to analyze cash movement to understand real liquidity and operational health.
Simplified Cash Flow (in $000s) | Operating Activities | Investing Activities | Financing Activities | Net Cash Flow |
Period | +$300 | -$150 | -$50 | +$100 |
TIPS
Positive operating cash flow = a healthy core business.
Cash from investing may drop if the company is expanding, not always bad.
Watch for negative cash flow paired with rising debt, a red flag.
CASE STUDY: A SaaS firm showed strong profits but negative cash flow. Deep analysis revealed delayed collections and overextended payment terms. Introducing automated billing improved cash flow by $200K per quarter, securing growth funding within six months.
DISCUSSION QUESTIONS
Question | Answer |
1. How can a profitable company run out of cash? | Poor collection timing or excessive reinvestment. |
2. What’s the healthiest source of cash flow? | Cash generated from core operations. |
3. Why do investors track cash more closely than revenue? | It shows whether profits are real and sustainable. |
PATH TO FLUENCY
Timeframe | Focus Area | Fluency Indicators | Manager KPI |
30 Days | Awareness | Understands the purpose and structure of all three financial statements | Improved confidence in financial discussions |
60 Days | Application | Can analyze simple P&L and cash flow data for decision-making | Better budget planning and pricing strategy |
90 Days | Mastery | Uses financial insights to inform strategy, manage profitability, and advise clients | Stronger ROI analysis and executive-level communication |
Master The Full Lifecycle of Selling, Leading, and Running the Business of Revenue
RECOMMENDED READING
Title | Author | Year | Publisher |
Financial Intelligence: A Manager’s Guide to Knowing What the Numbers Really Mean | Karen Berman & Joe Knight | 2013 | Harvard Business Review Press |
The Accounting Game: Basic Accounting Fresh from the Lemonade Stand | Darrell Mullis & Judith Orloff | 2008 | Sourcebooks |
Beyond The Acquisition: Thriving with Private Equity Ownership | Mort Greenberg | 2025 | digitalCORE Publishing |
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