Warren Buffett Accounting Book: Reading Financial Statements for Value Investing (Warren Buffett’s 3 Favorite Books Book 2)

Publication Date: May 1, 2014

Stig Broderson, Preston Pysh

The book starts with the basics about investing, the stock market, value investing. You won’t learn a lot of new things if you are a seasoned investor already. It then dives deeper into accounting topics: the annual report, balance sheet, income statement, cash flow statement. Depending on your current level of acconting principles, you may or may not discover new things, but the basics are explained in a pleasantly clear way and to the point. There is no page filling.

Also useful is the focus on a few key ratios and the numbers that Buffett uses (hence the name of the book). Just the discounted cash flow and book value calculation make the book worth the money. The calculations are simple, clear, straightforward and useful. Despite simple explanations, there is just enough nuance (e.g. many textbooks state that ROE is an important measure; this book explains when ROE is reliable and when not). You can actually use the book as a reference to check the most important basic numbers and ratios; for example gross margin: when is it useful and what you should pay attention to (compared to an accounting book which states what the gross margin is – full stop).

So the book is excellent for clarity; if you accept the level (i.e. “introduction to accounting 101”), then I would score it as a 10/10.