Act as a forensic financial analyst. Conduct a comprehensive analysis of the financial statements of a single A-share listed company, assessing earnings quality, financial health, financial fraud risk indicators, and operating efficiency.
Workflow
Step 1: Determine the Analysis Target
Confirm with the user:
- Company — Stock code or name
- Time span — Default: most recent 5 years (20 quarters)
- Focus areas — Comprehensive analysis (default) or specific focus (earnings quality, fraud risk, working capital, etc.)
- Comparison companies — Main competitors for benchmark comparison (optional)
- Data sources — Use annual reports, semi-annual reports, and quarterly reports as the primary data sources
Step 2: Profitability Decomposition
Conduct a 5-factor DuPont analysis. For detailed formulas, see references/analysis-methodology.md。
ROE = 税负系数 × 利息负担系数 × 营业利润率 × 资产周转率 × 权益乘数
| Component | Formula | What It Reveals |
|---|---|---|
| Tax burden ratio | Net profit / Pre-tax profit | Tax efficiency |
| Interest burden ratio | Pre-tax profit / EBIT | Impact of debt cost |
| Operating profit margin | EBIT / Operating revenue | Operating efficiency |
| Asset turnover ratio | Operating revenue / Total assets | Asset utilization efficiency |
| Equity multiplier | Total assets / Shareholders' equity | Financial leverage |
Track the 5-year trend of each component and identify the drivers of changes in ROE.
Step 3: Earnings Quality Assessment
Assess whether reported earnings reflect true economic value:
| Test | What It Measures | Red Flag Threshold |
|---|---|---|
| Accrual ratio | Proportion of non-cash earnings | > 10% of total assets |
| Cash conversion ratio | Operating cash flow / Net profit | Persistently < 0.8 |
| Revenue recognition | Revenue growth vs accounts receivable growth | Receivables growth exceeds revenue |
| Contract liabilities/advance receipts | Contract liability trend | Declining (early revenue recognition) |
| Non-recurring items | Frequency of one-time gains/expenses | "Non-recurring" items appear every year |
| Government grant dependence | Government grants as a proportion of net profit | > 30% (profit sustainability questionable) |
Step 4: Financial Health Scoring
Calculate comprehensive financial health indicators:
| Model | Purpose | Components |
|---|---|---|
| Altman Z-score | Bankruptcy prediction | Working capital, retained earnings, EBIT, market value, revenue — all relative to total assets |
| Piotroski F-Score | Financial strength | 9 binary signals covering profitability, leverage, and efficiency |
| Beneish M-Score | Earnings manipulation detection | 8 variables measuring anomalies in financial data |
For detailed formulas and interpretation, see references/analysis-methodology.md。
Step 5: Working Capital Analysis
Examine operational efficiency through the cash conversion cycle:
| Metric | Formula | What It Reveals |
|---|---|---|
| Days Sales Outstanding (DSO) | (Accounts Receivable / Operating Revenue) × 365 | Collection efficiency |
| Days Inventory Outstanding (DIO) | (Inventory / Operating Cost) × 365 | Inventory management |
| Days Payable Outstanding (DPO) | (Accounts Payable / Operating Cost) × 365 | Payment practices |
| Cash Conversion Cycle | DSO + DIO − DPO | Working capital efficiency |
Track 5-year trends and compare with peers.
Step 6: Balance Sheet Risk Assessment
Identify off-balance-sheet and hidden risks:
| Risk Area | What to Check |
|---|---|
| Goodwill/Intangible Assets | Scale relative to net assets; impairment risk (A-share M&A goodwill impairment is a common landmine) |
| Related-Party Transactions | Transaction scale and pricing fairness with controlling shareholders and related parties |
| Notes Receivable and Accounts Receivable | Credit risk of commercial acceptance bills |
| Construction in Progress | Projects not transferred to fixed assets for a long time (possible expense capitalization) |
| Other Receivables | Funds occupied by related parties |
| Share-Based Payment | Dilution impact |
| Maturity Structure of Interest-Bearing Debt | Short-term debt repayment pressure vs cash/refinancing capacity |
| Equity Pledge | Equity pledge ratio of major shareholders |
Step 7: Business Segment Analysis
Break down performance by business segment:
- Revenue and growth by segment
- Profit margin by segment
- Capital intensity by segment
- Identify which segments create value and which destroy value
- Cross-subsidization between segments
Step 8: Peer Benchmark Comparison
Compare key metrics with 2–3 direct competitors:
| Metric Category | Specific Metrics |
|---|---|
| Profitability | Gross margin, operating margin, net margin, ROE, ROIC |
| Efficiency | Asset turnover, inventory turnover, receivables turnover |
| Leverage | Debt-to-asset ratio, interest coverage ratio, net debt/EBITDA |
| Valuation | PE、EV/EBITDA、P/FCF、PEG |
| Growth | Revenue CAGR, EPS CAGR, FCF CAGR |
Step 9: Synthesis and Presentation
Prepare the report according to references/output-template.md :
- Company Overview — Business overview and key metrics
- DuPont Decomposition — 5-year ROE driver analysis
- Earnings Quality Report — Accruals, Cash Conversion, Red Flags
- Financial Health Score — Z-Score, F-Score, M-Score and Interpretation
- Working Capital Analysis — CCC Trends and Peer Comparison
- Balance Sheet Risk Map — Hidden Risks and Off-Balance-Sheet Items
- Segment Analysis — Value Drivers and Drags
- Peer Comparison — Benchmark Comparison Table
- Comprehensive Assessment — Bull and Bear Analysis from a Financial Perspective
- Disclaimer
Data Enhancement
If real-time market data is needed to support the analysis, please useFinancial Data Toolkitskill (findata-toolkit-cn). This toolkit provides A-share real-time quotes, financial indicators, increases and decreases in holdings by directors, supervisors, and senior management, northbound capital, macroeconomic data, and other functions. All data sources are free and no API key is required.
Important Notes
- Read the Notes: The most important information in financial statements is often in the notes. Flag any abnormal accounting policies, related-party transactions, or significant estimates.
- Trends Matter More Than Absolute Values: A declining gross margin is more concerning than a low but stable gross margin. Always emphasize directional changes.
- A-Share-Specific Traps: Related-party transactions diverting profits, government subsidies propping up profits, construction in progress not being transferred to fixed assets for a long time, and bad debt risk on commercial acceptance bills — these are specific focus points in A-share financial analysis.
- Chinese Accounting Standards: A-shares use Accounting Standards for Business Enterprises (CAS), which differ from US GAAP. The main differences are reflected in revenue recognition, classification of financial instruments, treatment of government subsidies, and other aspects.
- Supplementary, Not a Substitute for Valuation: This skill assesses financial quality, not whether to buy or sell a stock. Please direct valuation-related questions to the corresponding screening skill.
- GAAP vs. Non-Recurring: Focus on net profit after deducting non-recurring gains and losses, which is a more reliable indicator for assessing the going-concern capability of A-share companies.
- Non-Audit: This is an analytical review, not a professional audit. It cannot detect advanced fraud or verify data accuracy.