The Accounting Equation
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- čas přidán 11. 10. 2022
- In this video you will learn why the accounting equation is the single most important accounting concept. To do that effectively, I am going to simultaneously explain why it is critical in every three-statement model that you build.
The beautiful thing about accounting and the three-statement models it helps inform is that they create a closed system. What affects the income statement also affects the balance sheet, and any change on the balance sheet must be captured by the cash flow statement.
If you understand these relationships, then you will also know how cash moves through a business. Ultimately, and certainly as an investor, that is the goal.
The accounting equation is the first concept you need to master to build on this skill set.
01:33 The Accounting Equation
02:19 Definitions
04:42 Double Entry Bookkeeping
05:58 Expanded Accounting Equation
06:55 DEALER
07:20 Building a Balance Sheet
09:43 The Accounting Equation in the Context of Buying a Company
10:50 The Accounting Equation in the Context of a Three-Statement Model
Great tip Peter. I have 20 yrs of finance and investing experience and still have drawings and cliff notes handy on accounting fundamentals. Always comes in handy! Another great vid.
Thanks Paul! The visuals were huge for me as well. Have been preparing a lot of them for the rest of the series. The challenge has been finding video editors (that love nerdy finance content :) but we have been making good progress on this front.
Fantastic job! I have 10+ yoe and still found this video the best explanation so far. Both visually and contextually. I am expecting the cash movements video with excitement already. Keep it up!
Great video
Thank you!
this is great stuff. thank you
Thank you!
That was great. Do you have a course? I’ll buy it.
Thanks Asim! Yes ASM does offer courses. We are currently in the process of updating the Financial Statements Course with videos like this one. But all of the content is otherwise there. It covers Excel, Financial Statements, Three-Statement Model, DCF and LBO (as part of the ASM+ tier for $10 / month cancel anytime) and Private Equity Training and LBO Case Study (ASM+ PRO tier $25 / month cancel anytime). Hope that helps! www.asimplemodel.com/ Select "Curriculum" in the nav bar to learn more about the courses.
Quick question. I am going to purchase the Pro. I’m currently in private equity but doing mostly business development. My firm has allowed me to do modeling and deal related items due to my consistent efforts in learning the material. Are you going to be adding more coursework to the website? If so, I believe the 200 a year is definitely worth it. Let me know!
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Thanks Keithley! In the process of bringing on more video editors so we can create content faster :)