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Understanding Businesses

Every company you buy from, work for, or might someday invest in runs on the same basic math. This course teaches you to think about a business — how it makes money, whether it keeps any, what it owns and owes, and what could go wrong.

  • Difficulty: Intermediate
  • 11 modules
  • Estimated time: 2 hr 35 min
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What you'll be able to do

  • Explain revenue, expenses, gross profit, net profit, and margins
  • Read a simple income statement and balance sheet
  • Explain why a profitable company can still run out of cash
  • Compare business models and identify competitive advantages
  • Describe how people estimate what a company is worth
  • Name the main risks a business faces and how to spot them

Six questions to ask about any business

By the end of this course, you'll be able to answer these for any company — from a food truck to a Fortune 500 firm.

  1. How does it make money?Who pays, for what, and how often. That's revenue and the business model.
  2. Does it keep any of it?Margins show how much of each sales dollar survives as profit.
  3. What does it own and owe?The balance sheet shows whether a business is sturdy or fragile.
  4. Does cash actually come in?Profit on paper isn't the same as money in the bank.
  5. Why can't competitors copy it?Lasting advantages — brand, scale, network effects — protect profits.
  6. What could go wrong?Every business carries risk. Good analysis names it honestly.

A taste of what you'll read

By the end of the course, you'll be able to explain every line of this — and what it says about the business.

Sample: a coffee cart's yearly income statementHypothetical example

A hypothetical coffee cart earns $120,000 in revenue. After $42,000 in cost of goods sold, gross profit is $78,000, a 65% gross margin. After $60,000 in operating expenses, operating income is $18,000. After $4,000 in interest and taxes, net profit is $14,000, about a 11.7% net margin.

Revenue
$120,000
Cost of goods sold (coffee, milk, cups)
−$42,000
Gross profit65% gross margin
$78,000
Operating expenses (wages, permits, upkeep, marketing)
−$60,000
Operating income
$18,000
Interest and taxes
−$4,000
Net profit≈ 11.7% net margin
$14,000

Lessons

Each module includes a short lesson, a visual explanation, a real-world example, an interactive activity, and a knowledge check.

  1. 01How Businesses Make MoneyRevenue, expenses, and the basic equation behind every company.
  2. 02Profit and MarginsGross profit, net profit, and why margins tell you more than totals.
  3. 03Reading an Income StatementWalk through an income statement line by line.
  4. 04Assets, Liabilities, and EquityWhat a business owns, what it owes, and what's left for the owners.
  5. 05Reading a Balance SheetWhy assets always equal liabilities plus equity — and what to look for.
  6. 06Cash FlowWhy profitable companies can still run out of cash.
  7. 07Business ModelsSubscriptions, marketplaces, advertising, licensing, and more.
  8. 08Competitive AdvantagesBrand, scale, switching costs, and network effects.
  9. 09What Is a Company Worth?Market value, earnings multiples, and why price isn't the same as value.
  10. 10Business RiskCompetition, debt, concentration, and other things that go wrong.
  11. 11Putting It TogetherUse the six-question framework to analyze a business from start to finish.
  12. Final course quizScenario-based questions covering the whole course