Financial Statement Analysis Framework

Complete financial analysis framework used by equity and credit analysts. Includes liquidity, profitability, leverage, efficiency ratios with >15% materiality threshold and earnings management detection.

Analyze the balance sheets and income statements of [Company] from [Year Range] to assess financial health and risk factors.

Calculate and interpret these key financial ratios:

  • Liquidity: Current ratio, Quick ratio, Cash ratio
  • Profitability: Gross margin, Operating margin, Net margin, ROE, ROA
  • Leverage: Debt-to-equity, Interest coverage, Debt-to-EBITDA
  • Efficiency: Asset turnover, Inventory turnover, Days sales outstanding
  • Cash flow: Free cash flow, Operating cash flow margin

For each category:

1. Calculate the ratio for each period

2. Identify significant trends or year-over-year changes >15%

3. Compare to industry benchmarks (state your assumptions)

4. Flag any anomalies or potential red flags

Additionally:

  • Note any signs of earnings management or aggressive accounting
  • Assess how macroeconomic factors (interest rates, commodity prices) could impact financial stability
  • Provide a summary risk assessment: Low/Medium/High with justification

Present findings in tabular format with interpretive commentary.