{"level":{"id":2,"slug":"business-analysis","title":"Level 2 · Business Analysis","learningObjectives":"Read a real balance sheet, income statement, and cash flow statement; calculate and interpret ROE/ROIC/margins; judge the quality of a business.","recommendedPriorKnowledge":null,"expectedOutcomes":"By the end of this level, you can read a listed company's real financial statements, calculate and interpret its main ratios, and judge the quality of a business with your own sound judgment.","sortOrder":2,"icon":null},"modules":[{"id":10,"levelId":2,"slug":"financial-statements","title":"Financial statements","learningObjectives":"Understand what the three financial statements are and how they relate to each other, and know where to find a listed company's real financial statements.","recommendedPriorModuleId":null,"expectedOutcomes":"By the end of this module, you can explain what the three financial statements are and how they relate to each other, and locate a listed company's real annual report.","sortOrder":1},{"id":11,"levelId":2,"slug":"income-statement","title":"Income statement","learningObjectives":"Understand the structure of the income statement, what revenue, margins, and non-recurring items are, and recognize the most common mistakes when reading it.","recommendedPriorModuleId":null,"expectedOutcomes":"By the end of this module, you can read the structure of a real income statement, distinguish recurring from non-recurring items, and avoid the most common mistakes when interpreting it.","sortOrder":2},{"id":12,"levelId":2,"slug":"balance-sheet","title":"Balance sheet","learningObjectives":"Understand the structure of the balance sheet, what assets, liabilities, and equity are, and what working capital measures.","recommendedPriorModuleId":null,"expectedOutcomes":"By the end of this module, you can read the structure of a real balance sheet, distinguish assets from liabilities and equity, and assess a company's short-term financial health from its working capital.","sortOrder":3},{"id":13,"levelId":2,"slug":"cash-flow","title":"Cash flow","learningObjectives":"Understand why accounting profit isn't the same as a company's real cash, what the three flows that make up the statement of cash flows are, and what Free Cash Flow measures.","recommendedPriorModuleId":null,"expectedOutcomes":"By the end of this module, you can read a real statement of cash flows, explain why profit and cash can diverge, and calculate and interpret a company's Free Cash Flow.","sortOrder":4},{"id":14,"levelId":2,"slug":"financial-ratios","title":"Financial ratios","learningObjectives":"Understand what a financial ratio is and what question it answers, what liquidity ratios and debt-to-equity ratios in particular measure, and how to rigorously compare ratios between companies in the same sector.","recommendedPriorModuleId":null,"expectedOutcomes":"By the end of this module, you can calculate and interpret real liquidity and debt-to-equity ratios, and compare them with sound judgment between companies in the same sector.","sortOrder":5},{"id":15,"levelId":2,"slug":"roe","title":"ROE","learningObjectives":"Understand what ROE measures, how it breaks down using DuPont, and why a high ROE doesn't automatically mean a company is excellent.","recommendedPriorModuleId":null,"expectedOutcomes":"By the end of this module, you can calculate ROE, break it down with DuPont into its three factors, and judge with sound judgment whether a high ROE reflects real efficiency or leverage.","sortOrder":6},{"id":16,"levelId":2,"slug":"roic","title":"ROIC","learningObjectives":"Understand what ROIC measures, why it complements ROE, and why comparing ROIC with the cost of capital is what really lets you judge whether a company is creating or destroying value.","recommendedPriorModuleId":null,"expectedOutcomes":"By the end of this module, you can calculate ROIC, precisely distinguish it from ROE, and compare it with the cost of capital to judge whether a company creates or destroys value.","sortOrder":7},{"id":17,"levelId":2,"slug":"margins","title":"Margins","learningObjectives":"Understand what part of a business's economics each margin captures -- gross, operating, and net -- and what its evolution over time reveals, both separately and compared with each other.","recommendedPriorModuleId":null,"expectedOutcomes":"By the end of this module, you can precisely distinguish a real company's gross, operating, and net margin, and interpret what the evolution and divergence between them reveals.","sortOrder":8},{"id":18,"levelId":2,"slug":"business-quality","title":"Business quality","learningObjectives":"Understand what makes a company a quality business -- sustainable competitive advantages, consistency of results over time, and the absence of red flags -- without yet asking whether that company's price is reasonable.","recommendedPriorModuleId":null,"expectedOutcomes":"By the end of this module, and with it Level 2 as a whole, you can judge with your own sound judgment the quality of a real business from its financial statements, distinguishing quality from valuation.","sortOrder":9}]}