Financial statement analysis with ratios explained in plain words
Annual reports and management accounts are full of numbers but rarely say what they mean. Attach the statements and this prompt has your todo.is agent calculate the main profitability, liquidity, debt and cash flow ratios, compare years, spot warning signs and explain it all in plain English, with the workings in Excel so you can check every figure.
The prompt
- Analyze the attached financial statements for [COMPANY NAME] for [YEARS]. Use the income statement, balance sheet and cash flow statement. Calculate: revenue growth, gross, operating and net margin, EBITDA, current and quick ratio, debt to equity, interest cover, return on equity and assets, days receivable, days payable, inventory days, operating cash flow versus net profit, and free cash flow. Show each year side by side and explain what each trend means. Flag red flags such as profit growing while cash falls. Compare with typical ranges for [INDUSTRY], with links to sources. I am [PURPOSE]. Deliver a Word summary (2 pages) and an Excel file with every formula visible.
What to change
- [COMPANY NAME]: The company, e.g. "Harbor & Pine Ltd" (attach its accounts as PDF or Excel).
- [YEARS]: e.g. "2023 to 2025". Three years shows trends best.
- [INDUSTRY]: e.g. "specialty food retail" or "B2B software".
- [PURPOSE]: e.g. "a small investor", "considering buying this business", "a student" or "the owner preparing for a bank meeting".
Example result
- Financial statement analysis · Harbor & Pine Ltd, 2023 to 2025 (fictional example)
- In short
- Sales grew steadily and margins held, but cash is getting tighter: customers are paying more slowly and inventory is building up. The business is profitable and not over-borrowed, but working capital needs attention.
- Profitability
- • Revenue growth: +9% (2024), +12% (2025)
- • Gross margin: 41% → 40% → 39%. Small slide, possibly higher purchase costs
- • Operating margin: 11% → 12% → 12%
- • Net margin: 7.5% → 8.1% → 8.0%
- • Return on equity: 18% in 2025, healthy for a small retailer
- Liquidity
- • Current ratio: 1.9 → 1.6 → 1.3. Still above 1, but falling
- • Quick ratio (excludes inventory): 0.9 → 0.7 → 0.5. Below 1 means it relies on selling stock to pay short-term bills
- Working capital
- • Days receivable: 32 → 41 → 54. Customers pay 3 weeks slower than two years ago
- • Inventory days: 68 → 79 → 95
- • Days payable: 45 → 44 → 46
- Debt
- • Debt to equity: 0.4 → 0.5 → 0.6 · Interest cover: 9.2x, comfortable
- Cash flow
- • Operating cash flow vs net profit: 1.1x → 0.8x → 0.5x
- • Free cash flow: positive in 2023, negative in 2025
- Red flags
- • Profit up, cash down. Slower collections and growing stock absorb the cash the business earns
- • Quick ratio 0.5. A bad season could make paying suppliers hard
- Questions to ask management
- • Which customers are paying late, and are terms changing?
- • Is the extra inventory slow-moving or planned for growth?
- This is an educational analysis, not financial or investment advice. For decisions, speak with an accountant or financial adviser.
How to do it with todo.is
- Attach the statements (PDF annual report, Excel or scanned pages) and copy the prompt.
- Paste it into todo.is, or send it with the files to your agent by email.
- Your agent extracts the figures, calculates the ratios and explains the trends.
- Check the Excel workings, then ask follow-ups like "what if receivables went back to 35 days?"
Tips for a better result
- Use at least three years. One year of ratios says little, the trend tells the story.
- Always compare profit with operating cash flow. Profit can grow while cash runs out.
- Say who you are and why you are reading the numbers. A lender, buyer and owner care about different ratios.
- For public companies, your agent can find the latest filings on the web if you name the company.
financial statement analysis: FAQ
- What are the main types of financial statement analysis? Horizontal analysis (change over years), vertical analysis (each line as a share of revenue or assets) and ratio analysis (profitability, liquidity, leverage, efficiency and cash flow).
- What is a good current ratio? Often 1.2 to 2 for many businesses, but it depends on the industry. Below 1 means short-term debts are larger than short-term assets.
- Can it read a scanned PDF annual report? Yes, with OCR. Check the key figures it extracted against the document, because scans can misread digits.
- Is this financial advice? No. It is an analysis to help you understand the numbers. For investment, lending or purchase decisions, talk to a qualified accountant or adviser.
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