financial-statement-analyzer

name	financial-statement-analyzer
description	Perform forensic-level analysis of a single company's financial statements, evaluating earnings quality, financial health, fraud risk, and operational efficiency. Use when the user asks for a deep dive into a company's financials, DuPont analysis, earnings quality check, balance sheet analysis, cash flow analysis, Altman Z-score, Beneish M-score, working capital analysis, or any detailed single-company financial examination.
license	Apache-2.0

Financial Statement Deep Dive

Act as a forensic financial analyst. Perform comprehensive analysis of a single company's financial statements to evaluate earnings quality, financial health, fraud risk indicators, and operational efficiency.

Workflow

Step 1: Identify the Target

Confirm with the user:

1. Company — Ticker or name
2. Time period — Default: most recent 5 years (20 quarters)
3. Focus areas — Full analysis (default) or specific focus (earnings quality, fraud risk, working capital, etc.)
4. Comparison — Key competitor(s) for benchmarking (optional)
5. Data source — SEC filings (10-K, 10-Q) as primary source

Step 2: Profitability Decomposition

Perform 5-factor DuPont analysis. See references/analysis-methodology.md for formulas.

ROE = Tax Burden × Interest Burden × Operating Margin × Asset Turnover × Equity Multiplier

Component	Formula	What It Reveals
Tax burden	Net income / Pre-tax income	Tax efficiency
Interest burden	Pre-tax income / EBIT	Debt cost impact
Operating margin	EBIT / Revenue	Operational efficiency
Asset turnover	Revenue / Total assets	Asset utilization
Equity multiplier	Total assets / Equity	Financial leverage

Track each component over 5 years to identify what is driving ROE changes.

Step 3: Earnings Quality Assessment

Evaluate whether reported earnings reflect genuine economic value:

Test	What It Measures	Red Flag Threshold
Accruals ratio	Non-cash earnings proportion	> 10% of total assets
Cash conversion	Operating cash flow / Net income	< 0.8 persistently
Revenue recognition	Revenue growth vs receivables growth	Receivables growing faster
Deferred revenue	Trend in deferred revenue	Declining (front-loaded revenue)
Non-recurring items	One-time gains/charges frequency	"Non-recurring" items every year
Change in estimates	Depreciation, reserves, assumptions	Consistently income-boosting changes

Step 4: Financial Health Scoring

Calculate composite financial health indicators:

Model	Purpose	Components
Altman Z-Score	Bankruptcy prediction	Working capital, retained earnings, EBIT, market cap, sales — all relative to total assets
Piotroski F-Score	Financial strength	9 binary signals across profitability, leverage, and efficiency
Beneish M-Score	Earnings manipulation detection	8 variables measuring anomalies in financial data

See references/analysis-methodology.md for detailed formulas and interpretation.

Step 5: Working Capital Analysis

Examine operational efficiency through the cash conversion cycle:

Metric	Formula	What It Reveals
DSO (Days Sales Outstanding)	(Receivables / Revenue) × 365	Collection efficiency
DIO (Days Inventory Outstanding)	(Inventory / COGS) × 365	Inventory management
DPO (Days Payable Outstanding)	(Payables / COGS) × 365	Payment practices
Cash Conversion Cycle	DSO + DIO − DPO	Working capital efficiency

Track trends over 5 years and compare to peers.

Step 6: Balance Sheet Risk Assessment

Identify off-balance-sheet and hidden risks:

Risk Area	What to Check
Goodwill / Intangibles	Size relative to equity; impairment risk
Operating leases	Off-balance-sheet obligations (pre-ASC 842)
Pension obligations	Funded status, discount rate assumptions
Contingent liabilities	Litigation, guarantees, commitments
Variable interest entities	Unconsolidated entities
Share-based compensation	Dilution impact
Debt maturity profile	Near-term maturities vs cash/refinancing capacity

Step 7: Segment Analysis

Break down performance by business segment:

• Revenue and growth by segment
• Operating margin by segment
• Capital intensity by segment
• Identify which segments drive value and which destroy it
• Cross-subsidization between segments

Step 8: Peer Benchmarking

Compare key metrics against 2–3 direct competitors:

Metric Category	Metrics
Profitability	Gross margin, operating margin, net margin, ROE, ROIC
Efficiency	Asset turnover, inventory turnover, receivables turnover
Leverage	Debt/equity, interest coverage, net debt/EBITDA
Valuation	P/E, EV/EBITDA, P/FCF, PEG
Growth	Revenue CAGR, EPS CAGR, FCF CAGR

Step 9: Synthesize and Present

Compile findings per references/output-template.md:

1. Company Overview — Business summary and key metrics
2. DuPont Decomposition — 5-year ROE driver analysis
3. Earnings Quality Report — Accruals, cash conversion, red flags
4. Financial Health Scores — Z-Score, F-Score, M-Score with interpretation
5. Working Capital Analysis — CCC trend and peer comparison
6. Balance Sheet Risk Map — Hidden risks and off-balance-sheet items
7. Segment Analysis — Value drivers and detractors
8. Peer Comparison — Benchmarking table
9. Overall Assessment — Synthesis of bull/bear case from financial perspective
10. Disclaimers

Data Enhancement

For live market data to support this analysis, use the FinData Toolkit skill (findata-toolkit-us). It provides real-time stock metrics, SEC filings, financial calculators, portfolio analytics, factor screening, and macro indicators — all without API keys.

Important Guidelines

• Read the footnotes: The most important information in financial statements is often in the footnotes. Flag any unusual accounting policies, related-party transactions, or significant estimates.
• Trends matter more than levels: A declining operating margin is more concerning than a low-but-stable one. Always emphasize directional changes.
• Context is essential: A high debt/equity ratio means different things for a utility vs a tech company. Always interpret metrics within industry context.
• Complement, don't replace, valuation: This skill assesses financial quality, not whether the stock is a buy or sell. Direct valuation questions to the appropriate screening skills.
• GAAP vs non-GAAP: Many companies report "adjusted" earnings that exclude stock-based compensation, restructuring, and other real costs. Always anchor to GAAP, then discuss adjustments.
• Not an audit: This is analytical review, not a professional audit. It cannot detect sophisticated fraud or verify data accuracy.