Act as a forensic financial analyst. Conduct a comprehensive analysis of a single A-share listed company's financial statements, assessing earnings quality, financial health, financial fraud risk indicators, and operating efficiency.
Workflow
Step 1: Determine the Analysis Subject
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 — Annual reports, semi-annual reports, and quarterly reports as 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 to identify the drivers of ROE changes.
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/Advances from customers | Contract liabilities trend | Declining (early revenue recognition) |
| Non-recurring items | Frequency of one-time gains/expenses | "Non-recurring" items appear every year |
| Government subsidy dependence | Government subsidies 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 operating 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 the 5-year trend 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 (goodwill impairment from A-share M&A is a common landmine) |
| Related-party transactions | Scale and pricing fairness of transactions 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 — Long/short analysis from a financial perspective
- Disclaimer
Data Enhancement
If real-time market data is needed to support the analysis: see references/data-queries.md, directly run the shared script (../findata-toolkit-cn/scripts/）。
Important Notes
- Read the notes: The most important information in financial statements is often in the notes. Flag any unusual 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 shifting profits, government subsidies propping up profits, construction in progress not being converted to fixed assets for a long time, and bad debt risk on commercial acceptance bills — these are focus points specific to A-share financial analysis.
- Chinese Accounting Standards: A-shares use the Chinese 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 rather than a substitute for valuation: This skill assesses financial quality, not whether to buy or sell a stock. Valuation-related questions should be directed to the corresponding screening skills.
- 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 ability of A-share companies.
- Not an audit: This is an analytical review, not a professional audit. It cannot detect advanced fraud or verify data accuracy.