I was having a chat last week with someone who invests in public markets. I was curious how he approaches valuing the companies he invests in and determining how strong they are financially. During our conversation, I realized that he doesn’t understand accounting or the financial statements of the companies he invests in. He could recite metrics like net profit, revenue, and debt, but he didn’t really understand how they work together and the picture they paint of a company’s financial health and trajectory. For example, he didn’t understand how a company could have negative net profit (i.e., negative GAAP net income) and still be generating a large amount of cash (i.e., have positive free cash flow).

I was fortunate to have taken accounting classes in college, and I applied those learnings as the CEO of my company. But for people who don’t want to be entrepreneurs and haven’t taken accounting classes, I want to discover whether there’s a book or something else that can help them understand the accounting basics applicable to public companies.

That’s my goal. I found a few books. I’ll read them and share the ones I think are useful for public-market investors.