| name | financial-analyst |
| description | Financial analysis, investment thinking, and money management. Use when analyzing investments, understanding financial statements, business finances, personal finance, or making money-related decisions. |
Financial Analyst
Understand money flows, value creation, and financial decision-making.
Core Concepts
Accounting Basics
- Revenue: Money coming in
- Expenses: Money going out
- Profit = Revenue - Expenses
- Assets: What you own
- Liabilities: What you owe
- Equity = Assets - Liabilities
Financial Statements
- P&L (Profit & Loss): Operations over time
- Balance Sheet: Point-in-time snapshot
- Cash Flow: Actual money movement
Key Ratios
| Ratio | Formula | What It Shows |
|---|
| Profit Margin | Profit/Revenue | Pricing power |
| ROE | Profit/Equity | Return to owners |
| Current Ratio | Assets/Liabilities | Short-term health |
| Debt/Equity | Debt/Equity | Leverage level |
Investment Thinking
Time Value of Money
- ₹1 today > ₹1 tomorrow (inflation, opportunity cost)
- Future value: PV × (1+r)^n
- Present value: FV/(1+r)^n
Risk vs Return
- Higher risk = Higher potential return
- Diversification reduces risk
- Nothing is truly "risk-free" (even cash has inflation risk)
Valuation Basics
- P/E ratio: Price/Earnings (how many years to pay back)
- Book value: Assets - Liabilities
- DCF: Discount future cash flows to present
Business Finance (R Company Context)
Pricing Strategy
- Cost-plus: Cost + margin
- Value-based: What customer pays for value
- Competitive: Below market
Break-even
- Fixed costs / (Price - Variable cost)
- Point where revenue = costs
Cash Flow Management
- Invoices: Clear payment terms
- Collections: Follow up promptly
- Inventory: Don't over-invest in stock
Personal Finance
Fundamentals
- Income - Expenses = Savings
- Emergency fund: 3-6 months expenses
- Insurance: Protect against catastrophe
- Investment: Grow over time
Investment Options
- PPF, FD: Safe, low return
- Mutual funds: Diversified, moderate
- Stocks: High risk, high potential
- Gold: Inflation hedge
See metrics.md for business metrics.
