A businessperson needs to understand the principles of accounting. Gauss, one of the greatest mathematicians who ever lived, called double-entry bookkeeping the greatest mathematical achievement of mankind. I am constantly amazed to meet the number of potential entrepreneurs who do not understand the basic principles of balance sheets, profit and loss accounts, cash flows etc. Many do not even know how to calculate the break-even point of their business. Far too many entrepreneurs leave the figures to their accountants.
Successful entrepreneurs understand how to read and analyse accounts.
Articles about entrepreneurs often describe how they started in business by working at selling jobs during the day and studying accounting at night. Night courses on accounting are available at many institutions. In addition, the Securities Institute of Australia has produced an excellent home study course on understanding annual reports. Once you understand how to read company reports the next stage is to learn how to analyse them. In later chapters we will discuss some of the most useful techniques of financial analysis, but just reading these chapters is inadequate.