Financial Statement Analyzer

Purpose

Turn raw financial statements into a structured analysis with key ratios, trend identification, and an executive-ready narrative.

When to use

• reviewing quarterly or annual financial results
• preparing for board meetings or investor presentations
• conducting financial due diligence on a target company
• comparing financial performance across business units or competitors

When not to use

• preparing financial statements (use management-accounts-writer)
• statutory audit or compliance reporting
• tax preparation

Inputs

• Income Statement (P&L) for 2+ periods
• Balance Sheet for 2+ periods
• Cash Flow Statement for 2+ periods
• industry context or peer companies for comparison (optional)
• specific questions to answer (optional)

Procedure

1. Analyze Income Statement:
   • Revenue trend: growth rate YoY
   • Gross margin and trend
   • Operating expenses as % of revenue
   • EBITDA and net profit margins
   • Unusual or one-off items
2. Analyze Balance Sheet:
   • Liquidity: Current Ratio (CA/CL), Quick Ratio
   • Leverage: Debt-to-Equity, Interest Coverage
   • Working capital: DSO, DPO, DIO, Cash Conversion Cycle
   • Asset utilization: Total Asset Turnover, ROA
3. Analyze Cash Flow Statement:
   • Operating CF quality: is it positive and growing?
   • Free Cash Flow = Operating CF − Capex
   • Cash conversion: Net Income → Operating CF (quality of earnings)
   • Investing and financing activities — are they sustainable?
4. Calculate DuPont decomposition (ROE = Net Margin × Asset Turnover × Equity Multiplier)
5. Identify red flags: declining margins, rising debt, negative operating CF, DSO spike
6. Write analysis narrative: structured as Situation → Key Findings → Concerns → Recommendations

Output

• ratio analysis table organized by category (profitability, liquidity, leverage, efficiency)
• trend analysis (current vs prior period with directional arrows)
• DuPont decomposition of ROE
• red flags and areas of concern
• executive narrative (1-page analysis summary)

Definition of done

• minimum 12 financial ratios calculated across 4 categories
• at least 2 periods compared with trend direction noted
• red flags are explicitly called out
• narrative is in plain business language, not accounting jargon

Examples

• "Analyze our Q3 financials vs Q2 — what's improving and what's not?"
• "Review this company's annual report and tell me if it's a good acquisition target."
• "Why is our ROE declining despite growing revenue? Run a DuPont analysis."

Quality Criteria

• All claims reference specific frameworks, standards, or quantifiable data
• Content matches the stated audience's expertise level
• Recommendations are actionable — each includes a concrete next step
• No unsupported assertions or generic filler language

Verification (4C)

Check	Question
Correctness	Do referenced frameworks and standards match their official definitions?
Completeness	Are all key concepts covered without significant gaps for the stated audience?
Context-fit	Would this be useful for someone new to this domain, or is it too advanced/too basic?
Consequence	If a stakeholder acted on this immediately, what could they misinterpret?

Edge Cases

• Conflicting frameworks — State which framework takes precedence and why. Document the trade-off explicitly.
• Rapidly changing domain — Note information currency date. Flag sections likely to need updates.
• Audience has mixed expertise levels — Provide a glossary and mark advanced sections as optional.

Changelog

• v1.0.0 — Initial release