Financial Ratio Analysis — SKILL.md
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
Quick Invocation
# 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.
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 |
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) |
DuPont Analysis
Three-Factor Model
ROE = Net Margin × Asset Turnover × Equity Multiplier
Five-Factor Model
ROE = Tax Burden × Interest Burden × EBIT Margin × Asset Turnover × Equity Multiplier
Both models computed; trend shown for each component across 6 months.
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)
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.
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
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 |
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 valuesentity_type: "services" or "manufacturing" (for Altman Z model)
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)
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
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
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 |
