Analyzes financial statements, calculates key metrics, and generates investment reports. Use when reviewing earnings, building DCF models, or comparing company financials.
This skill provides systematic approaches to analyzing financial statements, calculating key performance metrics, and generating comprehensive investment reports.
| Metric | Formula | Interpretation |
|---|---|---|
| Gross Margin | (Revenue - COGS) / Revenue | Higher = better pricing power |
| Operating Margin | Operating Income / Revenue | Operational efficiency |
| Net Margin | Net Income / Revenue | Bottom-line profitability |
| ROE | Net Income / Shareholders' Equity | Return on shareholder investment |
| ROA | Net Income / Total Assets |
| Asset utilization efficiency |
| ROIC | NOPAT / Invested Capital | Return on all invested capital |
Formulas:
Gross Margin = (Revenue - COGS) / Revenue * 100
Operating Margin = Operating Income / Revenue * 100
Net Margin = Net Income / Revenue * 100
ROE = Net Income / Average Shareholders' Equity * 100
ROA = Net Income / Average Total Assets * 100
ROIC = NOPAT / (Total Debt + Shareholders' Equity - Cash) * 100
| Metric | Formula | Use Case |
|---|---|---|
| P/E Ratio | Price / EPS | Relative valuation |
| EV/EBITDA | Enterprise Value / EBITDA | Acquisition valuation |
| P/B Ratio | Price / Book Value per Share | Asset-heavy industries |
| P/S Ratio | Price / Revenue per Share | Early-stage/growth companies |
| PEG Ratio | P/E / EPS Growth Rate | Growth-adjusted valuation |
Enterprise Value Calculation:
EV = Market Cap + Total Debt - Cash and Equivalents
EV = Market Cap + Preferred Stock + Minority Interest + Total Debt - Cash
| Metric | Formula | Healthy Range |
|---|---|---|
| Current Ratio | Current Assets / Current Liabilities | 1.5 - 3.0 |
| Quick Ratio | (Cash + Receivables + Marketable Securities) / Current Liabilities | 1.0 - 1.5 |
| Cash Ratio | Cash / Current Liabilities | 0.5 - 1.0 |
| Metric | Formula | Interpretation |
|---|---|---|
| Debt/Equity | Total Debt / Shareholders' Equity | Lower = less risk |
| Debt/EBITDA | Total Debt / EBITDA | Industry-dependent |
| Interest Coverage | EBIT / Interest Expense | Higher = safer |
Free Cash Flow = EBIT(1-Tax Rate) + Depreciation - CapEx - Change in Working Capital
Projection periods: 5-10 years
Terminal value: Gordon Growth Model or Exit Multiple
WACC = (E/V * Re) + (D/V * Rd * (1 - Tc))
Where:
E = Market value of equity
D = Market value of debt
V = E + D
Re = Cost of equity (CAPM)
Rd = Cost of debt
Tc = Corporate tax rate
DCF Value = Sum of [FCF_t / (1 + WACC)^t] + [Terminal Value / (1 + WACC)^n]
| Metric | Company | Peer 1 | Peer 2 | Industry Avg |
|---|---|---|---|---|
| P/E | ||||
| EV/EBITDA | ||||
| Gross Margin | ||||
| Revenue Growth |
Always include:
| Industry | Key Metrics | Unique Factors |
|---|---|---|
| Tech | ARR, CAC, LTV, Net Retention | Scalability, TAM |
| Banking | NIM, NPL Ratio, CET1 | Interest rate sensitivity |
| Retail | Same-store sales, Inventory turns | Seasonality |
| Healthcare | Pipeline value, Patent cliff | Regulatory approval |
| Real Estate | FFO, NAV, Cap Rate | Interest rate impact |