Financial Ratio Analysis

Compute and report 25+ financial ratios (profitability, liquidity, leverage, efficiency, growth) from QBO data. Produces a 9-tab Excel workbook with traffic-light scoring, DuPont decomposition, Altman Z-Score, 6-month trend charts, trend-reversal detection, and CDC logging. Integrates with the Month-End Close pipeline.

Financial Ratio Analysis — SKILL.md

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When to Use This Skill

Use when a user asks for:

• Financial ratio analysis for a QBO-connected client
• Profitability, liquidity, leverage, or efficiency metrics
• DuPont decomposition or Altman Z-Score analysis
• Month-over-month, QoQ, or YoY ratio comparison
• Ratio benchmarking against industry averages
• Trend analysis across 6 months of ratios
• Trend reversal detection for any financial ratio
• CDC (change data capture) on ratio movements

NOT for:

• Bank reconciliation → use bank-reconciliation
• P&L variance analysis (line-item drill-down) → use pl-deep-analysis
• Cash flow forecasting → use cash-flow-forecast
• AR collections aging → use ar-collections
• Budget vs. actual → use budget-vs-actual

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Quick Invocation

bash

# Standard monthly ratio report
python3 scripts/pipelines/financial-ratios.py --slug sb-paulson --month 2026-03

# Custom output directory
python3 scripts/pipelines/financial-ratios.py --slug <client-slug> --month 2026-03 --out ~/Desktop/reports

# QBO sandbox
python3 scripts/pipelines/financial-ratios.py --slug sb-paulson --month 2026-03 --sandbox

Unknown slugs use default thresholds and disable inventory/valuation ratios unless SOP file found.

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What It Produces

Excel workbook saved to ~/Desktop (or --out path): FinancialRatios_{slug}_{YYYY_MM}.xlsx

Tab	Contents
Ratio Summary	All ratios with traffic lights, benchmarks, DuPont & Altman summary
Profitability	Gross/Operating/Net margins, ROA, ROE, EBITDA margin + 6-mo trend
Liquidity	Current/Quick/Cash ratios, Working capital + 6-mo trend
Leverage	D/E, D/A, Interest coverage, Equity multiplier + 6-mo trend
Efficiency	Asset/Inventory/Receivable/Payable turnover, DSO, DPO, CCC + 6-mo trend
Growth	Revenue (MoM/QoQ/YoY), Expense, Net income growth + 6-mo trend
DuPont Analysis	3-factor + 5-factor ROE decomposition, 6-month component trend
Trends	All ratios × 6 months with direction arrows + trend reversal flags
CDC Log	Ratio changes vs. prior run with trend reversal detection

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Ratio Categories

Profitability

Ratio	Formula
Gross Margin %	Gross Profit / Revenue × 100
Operating Margin %	EBIT / Revenue × 100
Net Margin %	Net Income / Revenue × 100
EBITDA Margin %	EBITDA / Revenue × 100
ROA	Net Income / Total Assets × 100
ROE	Net Income / Total Equity × 100

Liquidity

Ratio	Formula
Current Ratio	Current Assets / Current Liabilities
Quick Ratio	(Current Assets − Inventory) / Current Liabilities
Cash Ratio	Cash / Current Liabilities
Working Capital	Current Assets − Current Liabilities
Working Capital Ratio	Working Capital / Total Assets × 100

Leverage

Ratio	Formula
Debt-to-Equity	Total Liabilities / Total Equity
Debt-to-Assets	Total Liabilities / Total Assets
Interest Coverage	EBIT / Interest Expense
Equity Multiplier	Total Assets / Total Equity

Efficiency

Ratio	Formula
Asset Turnover	Revenue / Total Assets
Inventory Turnover	COGS / Inventory (annualized)
Receivable Turnover	Revenue / Accounts Receivable
DSO (Days Sales Outstanding)	AR / (Revenue / Days)
Payable Turnover	COGS / Accounts Payable
DPO (Days Payable Outstanding)	AP / (COGS / Days)
Cash Conversion Cycle	DSO + DIO − DPO

Growth

Ratio	Formula
Revenue Growth MoM	(Current − Prior) /
Revenue Growth QoQ	(Current − 3mo ago) /
Revenue Growth YoY	(Current − 12mo ago) /
Expense Growth	(Current Opex − Prior Opex) /
Net Income Growth	(Current NI − Prior NI) /

Valuation (SOP-gated)

Ratio	Formula
Revenue Multiple	Enterprise Value / (Revenue × 12)
EBITDA Multiple	Enterprise Value / (EBITDA × 12)

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DuPont Analysis

Three-Factor Model

text

ROE = Net Margin × Asset Turnover × Equity Multiplier

Five-Factor Model

text

ROE = Tax Burden × Interest Burden × EBIT Margin × Asset Turnover × Equity Multiplier

Both models computed; trend shown for each component across 6 months.

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Altman Z-Score

Bankruptcy risk indicator. Model selected automatically by entity_type in SOP config:

Model	Used For	Zones
Z' (Revised)	Private/Services (default)	Safe >2.9 | Grey 1.23-2.9 | Distress <1.23
Z (Original)	Manufacturing	Safe >2.99 | Grey 1.81-2.99 | Distress <1.81

Formula (Z' model): Z' = 0.717×(WC/TA) + 0.847×(RE/TA) + 3.107×(EBIT/TA) + 0.420×(BVE/TL) + 0.998×(Revenue/TA)

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Traffic Light Scoring

Each ratio scores GREEN / YELLOW / RED based on thresholds configured per client SOP.

• GREEN: Within healthy range
• YELLOW: Watch — approaching threshold
• RED: Action required

Thresholds are configured in CLIENT_CONFIGS within the script. Override by editing the dict or adding a client SOP file.

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Trend Reversal Detection

The pipeline detects when a ratio reverses direction over the 6-month window:

• Compares direction of first half vs. second half of history
• Flags ⚡ Trend Reversal — Now Improving or ⚠ Trend Reversal — Now Declining
• Flagged prominently in Trends tab and CDC Log

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Client SOP Integration

Place a sop.md file at clients/{slug}/sop.md. The pipeline reads it to detect:

SOP Signal	Effect
"POS collection" / "no accounts receivable"	Disables AR ratios (DSO, receivable turnover)
"no inventory" / "service-based"	Disables inventory ratios
"manufacturing" / "distribution"	Switches to original Altman Z model
enterprise value: $X	Enables valuation ratios (revenue/EBITDA multiples)
benchmark: {key} {value}	Overrides specific benchmark values

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Client Configuration

Add clients to CLIENT_CONFIGS in the script with:

• ratios_enabled list (which ratios to compute/display)
• thresholds dict per ratio: {"green": (min, max), "yellow": (min, max)}
• benchmarks dict per ratio: Decimal values
• entity_type: "services" or "manufacturing" (for Altman Z model)

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QBO Data Pulled

Report	Purpose
P&L (current month)	Revenue, COGS, OpEx, Net Income, Interest, D&A
Balance Sheet (current month-end)	Assets, Liabilities, Equity, Cash, AR, Inventory, AP
Cash Flow (current month)	Operating/Investing/Financing cash flows
P&L (prior month)	MoM growth ratios
P&L (3 months ago)	QoQ growth ratio
P&L (12 months ago)	YoY growth ratio
All of the above × 6 months	Historical trend analysis

Total QBO calls: ~17 per run (6-month history + current + prior + QoQ + YoY)

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CDC Cache

Cache stored at: .cache/financial-ratios/{slug}.json

Tracks:

• All ratio values from prior run
• Detects per-ratio changes (delta + % change)
• Flags trend reversals when 6-month history available
• Compares run-over-run for drift monitoring

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Technical Notes

• All financial math: Python Decimal (no floating-point errors)
• Division-by-zero: returns ZERO, never crashes
• Missing QBO lines: ZERO (safe fallback), does not inflate ratios
• Inventory turnover: annualized (× 12 for monthly periods)
• Interest coverage = 999.99 when no interest expense (signals no debt burden)
• Altman Z-Score uses book value of equity (not market cap) for private company model
• EBITDA = EBIT + D&A; EBIT = Net Income + Interest + Taxes
• Operating margin uses EBIT as proxy for operating income if QBO doesn't separate it

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Files

File	Description
scripts/pipelines/financial-ratios.py	Main pipeline script
skills/financial-ratios/SKILL.md	This file
.cache/financial-ratios/{slug}.json	CDC cache per client

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