Knowing How To Read An Income Statement Can Save Your Job
If you didn't do that, you are probably still working for a company that is in trouble and you may be facing a layoff. If you are lucky enough to be working for a company with sound financials there is still time. In either case, you owe it to yourself and your financial future to learn how to read an income statement.
Your employees may be wondering whether their job is secure. They may ask you if the company is doing okay. They may be concerned about losing their job if the company fails. Or they may be considering reinvesting some of their 401K contributions that are in the company's stock. Are you prepared to answer such questions?
While you certainly don't want to give your employees stock trading advice, you should at least understand the basics of the company's finances. This information is contained in the Financial Statement, sometimes also called an Earnings Statement or a P&L. Every manager needs to know how to read an income statement so they can explain it to their employees too.
John…you make some great points! I would add that an equally important component would be how those numbers on an income statement can be infuenced. Not the type of influence that we saw at Enron & Adelphia but the type of influence that occurs by decisions and behaviors that leaders/managers make throughout the normal course of business operations. At that point, your reading these financial statements from the perspectinve of what your contribution is and less from how soon should I start looking for a job. In our work with organizations, it’s equally as important to understand how actions (think upstream) effect financials (think downstream). Thanks for brining focus to this important topic.