Alan Kring Productions and Associations with Emergent Light Studio presents the Illinois
State Collegiate Compendium, academic lectures in Business and Economics.
This is Business Finance, FIL 190 for spring semester 2024.
Today, corporate accounting statements and there's some important information in this.
And I think I've already asked this, are you have taken FIL, accounting 131?
Have you?
Okay.
Well, I'm going to rely on that a little bit, but we take a very different approach.
And yeah, person.
We'll get to that in a little bit here, but as always, we're going to have a look at the
numbers today.
There we go.
Get the projector fired up.
But again, get your group formed today.
And then next week, I will lay out the framework of the term assignment for you.
And just as a direct statement about it, there are several places I use and I can have you
use to generate low level artificial intelligence prompts.
And one of those, some of them are for pay.
And I'm trying to avoid having you eat too much feed this time.
And I have found a good one thanks to our teaching assistant that's okay as well.
Yeah.
If we already have GPT-4, can we use that?
If you have it, yes.
But you are going to be submitting the prompt.
Well, let me be a little more general about it.
You will be submitting to me as part of the project your proposed creation narrative.
And then I will redirect you to make some changes so that you are not going to use one
that's already in the stack somewhere to make sure that it is a fully customized chat for
yourself.
But your group will work together in a team to develop it and to test it and to revise
it if necessary.
And remember that you will provide me with a preliminary, your final, what you are going
to put in to create it as at the midterm right after the break.
I think I'm going to make it.
And then you will have time over the next, the last half of the semester to refine it,
to test it against what you are learning in this class.
So in other words, you're going to be the adversary to make sure that when it gives
you answers, those are the correct answers to the questions.
Because at the end of this, you will present to the class and I will throw questions at
each group.
And they will show what they get from the GPT that they have created.
So you're having a chance to build it, develop it, and get an understanding of what comes
out for what you put in.
You're not going to be able to just do lol text messaging, types of English language,
and all that.
Every word, every sentence structure you use can impact on the quality of the product that's
coming out.
And remember, this is the very lowest of artificial intelligence.
What's already out there now is just almost scary.
But anyway, let's have a look at our numbers today and get back down to earth.
By the way, I have a good lol here.
Let me see if I can, well I'll find that in a minute here.
But as you can see, well no, it's your turn.
Is this a bold day or a bare day?
A bare day.
Yeah, it's actually kind of a noticeable bare day.
I mean, it is, oddly, you see the Dow started up, heaven knows why, but then the bears just
came climbing in, but the bulls started grabbing what they saw as bargains there.
So it's going to be a kind of volatile day.
It's up now, well it's pretty much just flat.
But the S&P 500 started out down and it's just tailing out.
And that is on a lot of rumors of bad earnings reports for the big tech companies, that kind
of thing.
It was happening last night.
One former student who's a trader in Chicago was telling me what he was hearing as rumors.
And there weren't very many good rumors in the mix last night.
And that, of course, built up in the aftermarket and the pre-market, an imbalance between
buy and sell was sell on the heavy side.
So as you can see, at the bell, it was down from the pressure of all those pre-market
orders filling in the first few minutes.
And then it just kept going down from there as more investors got all kinds of excited
about the down day.
And you see the NASDAQ is just taking a toilet break right now already, and we're early in
the day.
It's down more than a percent and a half.
I don't foresee that going too much farther.
When you get down that low, bargain hunters start to slide in and pick up some of the
stocks.
I say all this to you because this gets you to thinking in the mint mode of the investors,
of traders from my old world.
And it helps you to frame in a more objective light with the knowledge that we've had from
past experience being imparted to you through me.
But it's not a very pleasant day, let's put it that way.
It's not one of those great days.
And then if you see over, well, I clipped off a little too soon here.
Notice I kind of ignore the rustle.
I'm not sure what that's supposed to tell you about anything.
But crude is actually, it's taking a drop.
Notice that trading range, remember I said there was a trading range we've seen over
and over the past few years, and it likes to stay in that band, 72 to 79.
Well it's bouncing around.
It's bouncing downward now, but there you go.
And of course, if we have the stock market going to hell, the gold bugs are going to
say, oh boy, it's the apocalypse.
Let's buy gold and hide in our caves.
And so there they are, just pushing the price of gold up, buying gold and having a good
time with it.
Silver is actually up to some, but not like that.
That's much more dramatic.
But anyway, the commodities are up somewhat.
I'm not too concerned.
This is just more one of those days when I hesitate to say correction.
That's such a pop fad word.
It's one of those days where the markets are consolidating.
They're just in a grouchy mood today.
And so the bears come out of the woodwork and have a party.
Now the 10-year bond, there's buying pressure in the bonds.
You see the price going up, or you say, wait a minute, fat boy, I see red.
Yeah, that's the yield going down.
Price goes up, yield goes down.
So in other words, we have something.
I've told you this term before, and now I'm going to say it again.
You'll get used to it.
Flight to quality.
We have something with flight to quality, from riskier assets to less risky assets,
from stocks to bonds, from bonds to gold, from gold to bullets.
Well we see the stocks, the investors are getting out of stocks, and they are climbing
up here into bonds, buying bonds, stage one flight to quality.
And you've got the gold bugs having fun.
So you have a second stage of flight to quality, from stocks, risky, to bonds, less risky,
and from bonds to gold, which is even less risky, at least it's supposed to be.
Fortunately, we don't have any indexes on bullets right here in front of us.
So there you go.
So it is kind of a classic flight to quality day.
Now if this goes on day after day, I get a little worried.
But right now, all investors are doing as they're saying, okay, stocks suck, and we
can make some money selling out of the stocks and buying into the bonds because bond prices
are rising.
Let's grab it right now.
And the gold bugs are in their own world, having an exciting day today too.
But moving over here.
Now, just as a quick note, the euro, there's really nothing happening in the currency exchange
market, euro versus USD.
And about the same with the Great Britain Pound against USD.
There's really that pretty tame activity, a little bit of price appreciation, but not
much.
And Japan is more so the, well, that one's backwards.
So the Japanese yen against the US dollar is doing the opposite of what you see there
because we quote this one backwards.
See how USD is on the back end of these, like the euro, USD, and the pound against USD.
But you see USD is against the Japanese yen, so the quotes are backwards.
The reason is that the yen is a very low price against the dollar.
If you want a meal in Tokyo, you might spend a couple of thousand yen, and it sounds like
a lot, but no, that's just a few bucks kind of thing.
That's how it works.
But anyway, going over here, speaking of Tokyo, Tokyo started out in a really bad mood last
night and through the trading day, which was our sleep time over here, it climbed up, the
bulls crawled back out of the cave that the bears had slapped them into, and it came back
up and finished up actually not too bad, more than a half a percent for the day after a
wretched start.
Now the London, on the FTSE 100, it started down.
You see how the bulls pulled that one out, but we're still trading.
I think they're still trading over there, and the bears have taken back over, and the
profit taking has driven it back down, but it's really almost flat from where it started
the morning over in London.
So there we are.
That's sort of a quick survey of the markets as we are, looking at a few of our favorites.
Let's see what's happening.
Well, let me share you something.
I'm going to go over here to googlenews.google.com and show you something here.
I'm awfully full.
I can't, come on, I was looking for news articles.
This is one of those services that I was warning you against.
I can't find the article, and they're not showing me the news that I want to see.
Let me try this again.
Go back to Yahoo Finance.
And we're not going to be able to see back to the classic view.
They recommended in a news article that was repeated on Google News, they said, you've
got to invest in AI.
Well what's the great companies that are big and hot in AI?
First of all, the ones they recommended are not AI.
They're just big tech companies.
And second of all, the ones that they recommended were AMD, which doesn't even have a beta anymore,
and they also recommended Nvidia.
Now those two companies, you notice, I think I already showed you AMD, it had a beta posted
last few days ago.
But see the beta, see the price earnings ratios?
Those are not stocks that are appropriate investments for anyone with half a brain.
They're both high risk, highly overvalued stocks.
You have already heard in this class, and you'll hear me preach this gospel over and
over again, that you will know enough to know that the motley fool is most definitely the
motleyest of fools there are.
Unless you really want to follow a recommendation service that's very popular with the mass
media.
The motley fool is huge, but they're also idiots as far as this kind of stuff goes.
They don't understand appropriateness of investment.
You wouldn't do this.
Now as I was telling Mr. Luster before the class began, yeah AI is hot.
It's hot as hell.
But the landscape is in terrible turbulence because it's new, it's early.
And if you're going to consider getting in on the ground floor and grabbing stocks, your
guess is as good as mine.
The heavies in the business are Google, which is extraordinarily expensive to buy into,
and it's got a lot of other things, but it's pouring its resources into AI.
And other companies, open AI is hot in the game, but there are a lot of small players
and they are going to slug it out.
The one thing is for sure is that it costs a lot of money if you are going to be a source
of artificial intelligence.
Because you've got to have a lot of computing power in your domain, either in your own place
or as SAS, which is Software as a Service, or PAS, Platform as a Service, or at the very
least IAS, which is Infrastructure as a Service.
Any way you cut it, it's costly to get into this game.
Some little garage operation is not going to do AI.
They're going to use someone else's AI engines, AI cloud computing, AI cybersecurity to get
it done.
So yeah, it's incredible what's the potential and what's going to come.
But trying to find your edge in there as an investor, that's another game entirely.
Especially when I am trained by IBM and their resources are vast, just insanely large.
How you can compete against that, I don't know.
We'll see.
Hard to call.
Now let me get moving here a little bit.
Oh, let me pull.
Now this brings us into financial statements for today.
Now there are a couple of really key points.
I rely on the accounting department to teach you accounting.
This is the lecture where I come in knowing I have to teach you accounting, which means
that I come in here and I'm thinking, I'm kind of saying to myself, do I want to teach
this lecture or do I just want to kill myself?
I work on it and I'm still good with it for now, but I will try to make my distinctions
here very clear.
But I'm going to lay out the basics.
In this regard, what you hear from me is different from how accounting would see those numbers.
And what we can do for them.
Remember that, well, maybe you haven't heard this.
Accounting produces information products.
That's what they do.
They produce them for a number of different consumer constituencies.
I'm using kind of odd terminology.
This is the way we talk.
For example, one of their constituencies would be the management of the company.
They want to see the accounting statement.
Another constituency would be various levels of federal and state and possibly municipal
government.
They would be constituencies, consumers of this information product being produced by
these workers called accountants.
Now there are other ones too.
Accountants would be a constituency.
Possibly interest groups, environmental interest groups would be a constituency.
The Wall Street Boys would be a constituency.
The investment community in general would be a constituency.
These are all consumers of that information product that you make.
So that sets the platform.
They are producing a product.
The product is actually part of a product line.
The product line being the financial statements.
Now this product line, you will have different constituencies focusing to one greater degree
or another on certain of those and not so much on others possibly.
In our business, in finance, we will take that information product that they deliver,
the income statement, the balance sheet, the statement of retained earnings, the statement
of cash flows, and the notes to the financial statement.
We'll take those and then we have to fix them to the extent that we can.
In some cases we're just going to look at it and use their numbers.
But in other cases we will need to add things in, take things out that are not what we consider
to be meaningful, that are not what we need.
So in other words, you come to my house and I say I'm going to have steak.
So I make a steak.
And I give it to you.
Now I like my steak on the rare side, just above the level.
But you look at it and oh my God, it's bleeding and it's pulsating.
So you put it back on the grill for a ffff.
So you have altered my product.
Now he comes in and he says, now wait a minute, this thing is okay with the blood pouring
out of it and spurting, but it's not salty enough.
So you put some salt on it.
Or you would say, eww, fat, cholesterol, I'm not into that.
And so you'd cut off the fat.
And then you say it's not juicy enough, so you take my infuser and you some beef broth
into it.
So you're all altering the original product that I created.
That's how it is with us.
We are going to alter it for our needs, for our purposes.
And that's when it gets, the routines, don't be blindsided.
A lot of this, well this is just arithmetic.
And once we've got what we want out of it, then we go about the business of interpreting
what we see.
That's where we are really different.
The accountant's, here's your damn numbers, enjoy.
Well we have to make some meaning out of our version of those numbers.
What are they telling us?
What does this say?
Not about the company's past because these financial statements are what has happened
already.
We need to see into a dark crystal ball made from these numbers and from other resources
into what is going to happen.
Where is this company going?
Because the value of the corporation has nothing to do with those numbers.
It has everything to do with what those numbers will be or what is a better thing to think
about than those numbers.
Now I brought this up before, the classic example being a property plant and equipment.
That's a historical number subject to a depreciation schedule.
It has nothing to do with the value of that property plant and or equipment.
The value of that property plant and equipment is whatever it can be sold for now or whatever
it would cost to replace it now.
That is the number that we care about, replacement cost, not historical cost, market value of
the asset now, not what it was worth at one time.
Many many companies live on their reputation and I can give you so many examples of that.
And they think that measures the value of the company and they don't have to worry anymore
about being important because they are important according to the accountants.
But that's not how it works.
I can name you many great companies that stood tall in the past that are now rubble.
Sears is a good example of that, a fabulous example of that.
A leader, the innovator of catalogs to the common people, mass media, mass marketing
communication.
They screwed the pooch.
They were so far behind the curve on getting to an online selling platform, an e-commerce
solution.
They died because they could not innovate.
So this is why we in finance have to be different.
Whether you're in investing or in corporate finance or in real estate finance or in entertainment
finance or any kind of aspect of finance, it's all about what the future holds.
That having been said, we start with the financial statements themselves.
And let me write some things on the board here, kill this for a minute.
And I don't know what to do, just mute it.
Okay let me grab some marker here.
Now these financial statements.
The pivotal statement, and I don't know if they teach you this in accounting exactly,
but I'm talking to you from the perspective of a finance professional.
The pivotal financial statement, a lot of people think, well that would be the income
statement because that's where the profit is.
No, the pivotal, the core statement is the balance sheet.
Who thought of using glass to write on?
Might have to have the TA come up so I can write on his back.
You can read that better.
Just kidding, easy.
Okay, because the other financial statements actually flow, they are like side calculations.
They are like envelopes on which you do scratch work that then shows up in the balance sheet.
Well the income statement is a giant envelope.
Your revenues minus your costs minus your, what was I saying about, minus your interest
expense minus your taxes gets you to net income.
Well that's the net income.
That's the one, but it's still going to stop some place along the way to get to the balance
sheet because then that goes to the statement of retained earnings.
That last number there along with some other numbers and that goes to the shareholders
equity in the balance sheet.
Calculate this, then calculate that and then take it over and plop it into the balance
sheet in the stockholders equity, liabilities and stockholders equity.
So there's that one.
And then you have this one over here, the statement of cash flows, which show how the
cash actually moves.
That's the one that's closest to our hearts in finance because this is showing cash moving
through the various investing activities, operating activities, investment activities,
financing activities.
That's showing what was drawing cash and what was providing cash.
We actually, back in my time, we called this one the sources and uses statement.
It was kind of more descriptive because it told you where money was coming in, okay,
that would be at the net income line.
However, where was more money?
What else do we have to correct?
And then they have add back to the depreciation expense because there's no such thing.
There is no depreciation.
I always thought about making a corporation called depreciation so that every company
in the world would have to write a check to me, depreciation, but absent that, okay.
So you have to do that fix.
Okay, and then you've got these problems with the assets and the liabilities, especially
the current assets and the current liabilities.
Let me give you an example.
I'm going to ask this and know that someone has not.
Madam, have you seen my artwork?
Of course you haven't.
I have.
You?
Yeah.
So you're the weirdo who's putting those odd comments.
No.
No, okay.
No, I had a really weird one this morning.
Oh, Lincoln pops off.
Yeah, I mean, most of it, if you ever wanted to see what I do, go to either my Amazon storefront
or to Instagram, Professor Wraith.
But okay, I go to an art show and my art is expensive.
People come in.
Most people really like it.
So I do the sales routine and it's the artist sales routine.
I sit there like the sad, brooding artist whom no one understands and then I look up,
you see my art, you like it, don't you?
No one likes my art.
Do you want to buy it?
You know, the whole game.
And then, okay, artwork $1,200, let's show this here.
Okay, I can't afford this.
I love it, but where would you put it?
Tell me where you would put it.
The whole thing.
Okay.
Well, I offer financing.
You do?
Yes, yes.
So I sell for $1,200, $400 cash and then $800 as an account receivable.
So to the IRS, to the world that sees my income statement, they see that I pulled in $1,200,
but that is a lie because what really happened was that revenue was $1,200 and then I had
cash debited $400, but accounts receivable debited $800.
So most of the action did not happen in the income statement.
That has to be fixed.
You see, when current assets go up, your cash flow goes down from period to period.
Current assets go up, free cash flow goes down based from the revenue.
Current assets go up, free cash flow goes down.
But then she'll pay me off, she'll pay the $800, at which time I will then fix the mess
that happened.
The account receivable will go down, so free cash flow will go up.
If you can get this down the first couple of times, write this in your notes because
I do it on quizzes, on the exam, and you'll see even to this day, once in a while, I get
so confused I can't find my own button using roadmaps and Rand McNally.
Okay?
GPS.
Okay.
But, okay, so there you go.
You see, we in finance can't believe the income statement because the income statement
is going to lie.
But it's not just in revenue, it's also on the other side.
I decide, sir, that I'm going to hire you as my assistant, okay, at our shows.
So I say, you do this gig with me and I'll pay you $300.
You $100.
No, $300, okay?
Well good.
So on my expenses, wages have gone, I've paid $300 in wages, which looks like it hurt free
cash flow.
But I am a son of a bitch.
I'll pay him next month.
So what looks like $300 out of my pocket was actually $300 increase in wages payable.
So I actually freed up cash relative to what the income statement says.
So when a current liability goes up, free cash flow relative to what's on the income
statement increases.
You follow me?
But then eventually I pay him, you know, he comes around with his ginormous friends and
baseball bats.
And so, okay, here's your $300.
So then wages payable, a current liability, goes down and that means that free cash flow
suffers.
You follow?
Put this diagram somewhere.
I mean, you know, if you're into tattoos, you can't beat this as a tat on your thigh.
I've done that myself.
You follow it?
But right there, the income statement appears to us in a form that is great with accounting,
generally accepted accounting principles, consistently applied, all that, but it's not
telling us what really happened.
So we have to, the statement of cash flows helps us see what really happened relative
to the revenue.
The next thing that's going to happen here, you might see me once in a while, I do a gig
every now and then.
I used to do a lot of professional photography.
I've moved more to art now, but back in the day, I did a lot of professional photography.
Product photography, portrait, model, that kind of stuff.
Then I moved over.
I did so much photography of people that I began to really hate human beings, so I moved
over to landscape photography.
But you might see me bring in someday some of my photography equipment.
I carry it around because it's so costly.
I don't want to leave it someplace.
I bought a lens, $4,500 portrait lens.
Very, very expensive.
Now $4,500 went out of my pocket.
It's gone.
That $4,500, I am not allowed to put that as an operating expense.
I must, to use the term, capitalize it, and then depreciate it over the number of years
I'm allowed to.
Now if I were doing straight line over five years, that means that on the income statement,
you would see depreciation expense $900 five years in a row.
There was no $900 anywhere.
All that happened was in the first year, I spent $4,500.
So I must take out the depreciation, I must add back depreciation expense because it doesn't
exist.
But then I have to subtract what really happened, $4,500 in the first year.
The statement of cash flows helps us do that too.
And the question comes up, oh wait a minute fat boy, why do we just add it in to begin
with?
Why don't we just not look at the depreciation expense in the income statement?
There's a reason, because the depreciation expense actually does create a real cash flow
from its impact on the taxes we pay.
Because every year I take that $900 off, that's $900 that I don't have to pay taxes on.
So it creates, it's a myth, but it creates an actual free cash flow for us.
So I leave it in when I'm first starting to do the financial analysis.
But then I take it out at the end.
Because the amount itself, okay if you take, say I'm in a 20% tax bracket, that 9% means
that I save, that $900 rather, means that I save $900 times.20, which would be $180.
So I really do want to have it in there in the expenses so that I can recognize the tax
shield from it.
But then once that's done, I have to add it back in, because it never really happened,
the $900.
So take all that, and we're going to go through something here in a minute and I'll flesh
things out.
But the statement of cash flows, it looks at all the different activity types in a company.
Investing types of activity, then the financing types of activity, and then it also looks
at the investing types of activities.
And that's where capital expenditures, you invest in stuff, would come in.
And so it works those back and forth.
And at the top, how much cash you're started with, at the bottom was cash flows coming
in through revenues minus the changes in accounts receivable and all that.
Then how much came in to our organization through our investments in other companies,
how much went out through our actual expenditures on heavy capital equipment, all that kind
of stuff.
At the bottom is the cash that we should have at the end of the year.
There was the cash that was in the bank at the beginning, then there was up and down
all these things we have to add and subtract, and then at the end, that would mean that
much cash is at the end.
So the statement of cash flows ends with the cash balance at the end of the period.
Well that is the very first line of the balance sheet on the asset side.
Every one of those statements is something to do with the balance sheet.
Now I mentioned one other financial statement that is not emphasized hardly at all in your
early accounting courses.
And I learned all about this one through my work many years ago as a consultant.
Here are the notes to the financial statement.
They can go on and on and on, but hidden in there is a ton of information, much of it
numerical that helps us as financial analysts better understand the company.
For example, in the notes somewhere is going to be something about executive compensation
and stock options and all that kind of stuff, and stock or warrants that have been given
to executives.
And there will also be notes about leases and all that kind of stuff, our liability
exposures and all this kind of stuff.
And even beyond that, I'll tell you a quick story.
One of the things I did as a consultant, as I mentioned earlier, I would help small companies
go public with what were called million dollar offerings or something like that.
And another part of that was we had a trick back in the day.
It's still around, but only the big dogs can do it because they try to throw a little dog
like me in jail for it.
It was called a reverse merger.
What we would do is we would find a dead, a dead as a doornail public company, something
that no one even knew where the officers of the company or the directors were.
It was sitting there just in limbo.
It existed.
And at one time, it filed paperwork with the SEC because you have to do that quarterly
and annually and all that.
But that had all gone away.
It was just sitting there.
And you would have, back in that time, you didn't have computers to do it.
You had to just prowl through these big, thick books of public companies that were done by
places like Value Line and all that.
And we would find possibilities.
And then we'd start researching.
And okay, we've got it.
We have a dead public shell, as we call it.
Now you, sir, have a private company.
You contact me.
Well, we want to go public.
Well, that's going to be complicated.
It's an insane amount of paperwork.
And they're going to look up your butts with a microscope.
And you're not exactly what we would call the upstanding fine stud.
So here's what I'm going to do.
I have a way to do this for you.
We are going to reverse merge your private company into the public shell.
But first, I have to take control of the public shell.
So I send all the shareholders of that company.
I get a shareholders list, and I say, I am going to bring this company back to life.
Here is a document where you as a shareholders vote me a million shares and give me control
as the board of directors.
And I get enough of them sending back the proxy card.
And I've got it.
And then I can use my power to reverse merge your private company into my dead skeleton.
And then it comes to life.
And the first thing I'll do is I'll go to the SEC.
And I'll say, I've got to catch up all these back documents.
And I work with them.
OK, it's alive again.
And then the next thing I have to do is get a trading symbol, because the trading symbol
has disappeared.
And that's where I have to do what's called a 15C211 with the NASD, the National Association
of Securities Dealers.
And I can't believe I'm saying this.
Fortunately, the statute of limitations is passed, so there's that.
Bite me.
But here's the thing is that the 15C211 is a hellacious document.
And they have compliance officers who are going to go through my petition for a trading
symbol with a fine-tooth comb.
I ended up being assigned for these deals of mine to this compliance officer named Claire.
She was old, mean, foul-mouthed.
She was a hateful woman.
I really liked her.
And she gave me everything.
And she gave it to me in no uncertain terms.
The last thing she did the first time I filed, she said, well, you've done everything I want,
except you've got one note that you need to put in there.
And she said, I'll call you back on a personal line here later.
And so she said, OK, here's what you do.
Last note.
These financial statements have been prepared with generally accepted accounting principles
consistently applied.
This may not be the case with this company because accruals may not be valid.
Remember, accruals, you're assuming the company is a going concern.
This company may not be a going concern, and investors are advised to take that into consideration
with any investment herein.
It was a note there at the bottom saying, you're looking at financial statements that
are a myth.
And I covered my ass for my client doing that.
OK?
Notes.
Read them for God's sake.
They've got a lot of information in them.
Mother's work is now.
I got a little bit of time left.
Notes.
Pay attention to them.
Now, the next thing I'm going to show you, I'm going to bring this guy back to life.
And I'm going to show you what we call a primary resource.
You will use this for the rest of your miserable lives in finance, especially here at ISU.
When you do term papers and research analysis for classes, you do not go to places like
Wikistupidia or Investistupidia or to Yee-Haw Finance.
You don't go there for the information.
You go to the SEC.
Every public company must file documents with the SEC all the time.
Now, back in my time, we could lie.
But then a couple of really huge scandals wiped out a lot of people's money, and they
cracked down under something called Sarbanes-Oxley.
Now the financial statements must be certified with signatures by the officers and directors
of the company.
So if there is a material misstatement of fact, and you have signed it, and you have,
and you have, the SEC will fine the company.
But then because you personally signed them, it will fine you too.
And if the misstatements are egregious enough, they will refer to the Department of Justice.
The Department of Justice, unlike the SEC, can put you in prison.
That means that you could be some hard-timer's old lady if you lie.
That's why the only people who lie on financial statements right now are people like Elon
Musk, because literally they caught him red-handed.
What does he do?
He goes on Twitter and cuss them out.
Well that was, I do that, you know, I'm going to be the wife of a guy named Bubba.
He just cussed them out on Twitter a couple of years ago.
Anyway, but you can rely on these.
These are the statements that have been uploaded to the SEC and certified as true and without
material misstatements by the company.
No other source is primary with financial data.
No other source.
Well I read this report on, no.
Well I went and they have income statements and balance sheets.
I can see right here, look, look, right here.
See I can find the financials right here.
I could just go to Yahoo Finance and there they are.
There are your damn statements right there.
No.
The truth of the matter is that almost every place is drawing feed, data feed from those
SEC filings.
What's worse though, what's bad is it's, I catch it all the time.
Sometimes I'm not thinking.
Sometimes the data glitches and a number, a really important number isn't there or it's
wrong.
They didn't do it on purpose.
It's just that the data integrity isn't there like it is at the SEC.
So how do we do this?
Go back to a story from long ago.
We use the Edgar filing system and I'll show you that next week on Monday.
I'll show you that.
Every company even has to provide all their financials in Excel format.
So you can just draw down the Excel sheets, carve them up, make pretty charts and look
like a hero.
You don't even have to key in the data.
It's right there in Excel.
SEC requires that all companies and let me tell you, there is so much data.
I'm going to have to show you how to move the tabs around so you get to what you need
because there can be 50 tabs of financial information.
And all I want are these couple, the income statement balance sheet and statement of cash
flows for heaven's sake.
So you have to go around and dig it up.
I'm going to show you how to do that.
But for now, what I want you to do is for the remainder of this period, you do have
a quiz.
It opens up at 1030 but you would have until 1050 to do it.
It's a 10 minute quiz.
But first I want you to get together, figure out who you want to work with for the rest
of this semester that you won't commit acts of violence against.
But for me, that's all I have for you right now.
I thank you.