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SKILL.md
npx skills add octagonai/skills --skill sec-cash-flow-review
Extract and analyze cash flow trends and working capital changes from SEC filings using Octagon MCP. Use when researching operating cash flow, investing activities, financing activities, free cash flow, liquidity, and working capital dynamics from 10-K and 10-Q filings.
npx skills add octagonai/skills --skill sec-cash-flow-review
Extract and analyze cash flow trends and working capital changes from SEC filings for public companies using the Octagon MCP server.
Ensure Octagon MCP is configured in your AI agent (Cursor, Claude Desktop, Windsurf, etc.). See references/mcp-setup.md for installation instructions.
Determine the following before querying:
Use the octagon-agent tool with a natural language prompt:
MCP Call Format:
The agent returns structured cash flow analysis including:
Cash Flow Trends:
Working Capital Changes:
Key Observations:
Data Sources: octagon-financials-agent, octagon-sec-agent, octagon-web-search-agent
See references/interpreting-results.md for guidance on:
Full Cash Flow Analysis:
Free Cash Flow Focus:
Working Capital Deep Dive:
Liquidity Assessment:
CapEx Analysis:
Financing Activities:
| Component | Description |
|---|---|
| Net Income | Starting point |
| Depreciation/Amortization | Non-cash add-back |
| Stock Compensation | Non-cash expense |
| Deferred Taxes | Timing differences |
| Working Capital Changes | Current asset/liability changes |
| Other Adjustments | Non-cash items |
| Component | Description |
|---|---|
| Capital Expenditures | Property, equipment purchases |
| Acquisitions | Business combinations |
| Investment Purchases | Securities bought |
| Investment Sales | Securities sold |
| Asset Dispositions | Property, equipment sales |
| Component | Description |
|---|---|
| Debt Issuance | Borrowings |
| Debt Repayment | Principal payments |
| Share Issuance | Stock offerings |
| Share Repurchases | Buybacks |
| Dividends | Shareholder distributions |
| Metric | Calculation | What It Shows |
|---|---|---|
| Operating Cash Flow | From statement | Cash from operations |
| Free Cash Flow | OCF - CapEx | Cash after investment |
| FCF Margin | FCF / Revenue | Cash generation rate |
| Cash Conversion | OCF / Net Income | Earnings quality |
| Metric | Calculation | What It Shows |
|---|---|---|
| Cash Position | Cash + equivalents | Available liquidity |
| Cash Runway | Cash / Monthly Burn | Months of runway |
| Quick Ratio | (Cash + Receivables) / Current Liabilities | Short-term coverage |
| Current Ratio | Current Assets / Current Liabilities | Working capital |
| Metric | Calculation | What It Shows |
|---|---|---|
| CapEx Intensity | CapEx / Revenue | Investment level |
| CapEx / D&A | CapEx / Depreciation | Maintenance vs. growth |
| Acquisition Spend | From investing | M&A activity |
| Investment Returns | Sales / Purchases | Portfolio activity |
| Component | Increase Means | Decrease Means |
|---|---|---|
| Accounts Receivable | Cash used | Cash provided |
| Inventory | Cash used | Cash provided |
| Prepaid Expenses | Cash used | Cash provided |
| Accounts Payable | Cash provided | Cash used |
| Accrued Liabilities | Cash provided | Cash used |
| Deferred Revenue | Cash provided | Cash used |
| Metric | Calculation |
|---|---|
| Days Sales Outstanding | (AR / Revenue) × 365 |
| Days Inventory Outstanding | (Inventory / COGS) × 365 |
| Days Payables Outstanding | (AP / COGS) × 365 |
| Cash Conversion Cycle | DSO + DIO - DPO |
| Trend | Interpretation |
|---|---|
| Declining CCC | Improved efficiency |
| Rising CCC | Cash tied up longer |
| Negative CCC | Customer-funded model |
| Stable CCC | Consistent operations |
| Factor | High Quality | Low Quality |
|---|---|---|
| OCF vs. Net Income | OCF > NI | OCF < NI |
| Sustainability | Recurring sources | One-time items |
| Working Capital | Stable trends | Erratic changes |
| Non-Cash Charges | Reasonable D&A | Excessive add-backs |
| Metric | Prior Period | Current | Change |
|---|---|---|---|
| Operating CF | |||
| Investing CF | |||
| Financing CF | |||
| Free Cash Flow | |||
| Working Capital |
Track over time:
| Factor | Assessment |
|---|---|
| Absolute Level | Adequate for operations |
| Trend | Growing or declining |
| vs. Obligations | Coverage of debt, commitments |
| vs. Investment | Ability to fund growth |
| Scenario | Calculation |
|---|---|
| Conservative | Cash / Average Monthly Burn |
| Including Revolver | (Cash + Available Credit) / Burn |
| Stress | Cash / Peak Monthly Burn |
| Factor | What to Check |
|---|---|
| Debt/EBITDA | Leverage limits |
| Interest Coverage | Payment ability |
| Minimum Cash | Required balances |
| CapEx Limits | Investment constraints |
| Activity | Implication |
|---|---|
| Debt Issuance | Leverage increase |
| Debt Repayment | Deleveraging |
| Equity Issuance | Dilution, capital raise |
| Buybacks | Return to shareholders |
| Dividends | Cash distribution |
| Priority | What It Signals |
|---|---|
| Heavy CapEx | Growth investment |
| Heavy Buybacks | Mature, returning cash |
| Debt Focus | Deleveraging priority |
| M&A | External growth |
| Balanced | Diversified approach |
Compare OCF to earnings: Divergence signals quality issues.
Track FCF trends: More important than net income.
Analyze working capital drivers: Understand component changes.
Consider seasonality: Quarterly patterns affect cash flow.
Read footnotes: Capital commitments disclosed there.
Check management discussion: Cash flow commentary in MD&A.
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