financial-statement-analyzer

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

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:

Step 4: Financial Health Scoring

Calculate composite financial health indicators:

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

Step 5: Working Capital Analysis

Examine operational efficiency through the cash conversion cycle:

Track trends over 5 years and compare to peers.

Step 6: Balance Sheet Risk Assessment

Identify off-balance-sheet and hidden risks:

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:

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.