Analyzing Financial Data

How to Analyse a Company (Like a Real Financial Analyst) Most people look at the stock price. Analysts look beneath it. Because the secret to smart investing isn’t predicting it’s understanding. Here’s how professionals break down a company: [1]. Understand the Business Before the balance sheet, comes clarity. What does the company actually do? Where does its money come from? Is it cyclical, defensive, or growth-oriented? Does it have an edge: brand, patents, or market share? If you don’t understand how it makes money, you can’t value what it’s worth. [2]. Analyse the Financials Numbers tell a story, if you know how to read them. Income Statement: Revenue growth (YoY) → Is it expanding or stagnating? Gross & Net Margins → Are profits growing with sales? EPS trend → Consistency builds trust. Balance Sheet: Current Ratio = Liquidity Debt-to-Equity < 0.35 → Stability ROE > 15% → Efficiency Cash Flow Statement: OCF > Net Income → Real cash, not accounting profits. Interest Coverage > 2.5 → Comfort with debt. Free Cash Flow = OCF – CapEx Healthy cash flow means survival. Healthy margins mean growth. [3]. Evaluate Valuation Now the question — is it worth it? P/E → Are you overpaying for growth? PEG → Growth-adjusted pricing (lower is better) EV/EBITDA → Compare across peers DCF → Find intrinsic value Because price is what you pay. Value is what you get. [4]. Assess Management & Risk A company is only as strong as its leadership. Transparent governance → Trust Consistent strategy → Vision Red flags → Sudden accounting shifts, share dilution, or rising debt. Good management compounds value faster than numbers do. [5]. Decide with Logic, Not Emotion Ask yourself: Is it undervalued? Is it growth, value, or dividend play? What’s my exit plan? You don’t need to be smarter than everyone just more disciplined than most. In investing, clarity is your greatest edge. The deeper you understand the business, the lesser you’ll depend on luck. ----- Jeetain Kumar, FMVA® Founder, FCP Consulting Helping students break into finance and consulting PS: If you want to start your career in finance, check the link in the comments to book a 1:1 session with me #finance #cfa #investment #interviews #consultation

𝐀𝐧𝐚𝐥𝐲𝐳𝐢𝐧𝐠 𝐅𝐢𝐧𝐚𝐧𝐜𝐢𝐚𝐥𝐬 𝐋𝐢𝐤𝐞 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐁𝐚𝐧𝐤𝐞𝐫𝐬 1️⃣ Start with the Big Picture Understanding the broader context is essential. Industry Dynamics: What macroeconomic factors, competitive forces, and regulatory changes impact the company Business Model: How does the company make money? Is its revenue model scalable and sustainable Management's Narrative: Read annual reports, investor calls, and press releases. Do the financials align with the story management is telling A mismatch between the narrative and the numbers can be your first red flag. 2️⃣ Examine the Revenue in Detail Revenue quality is the foundation of any valuation. Ask yourself: Are revenue streams diversified, or is the company overly dependent on a few customers or products? Are there unusual spikes, seasonality, or growth patterns Check accounts receivable—are they growing faster than revenue This could signal aggressive revenue recognition. 3️⃣ Scrutinize Expenses for Insights Drill into cost structures and compare trends over time: Cost of Goods Sold (COGS): Are margins consistent, or do they show unexpected variability Operating Expenses: Is there a logical correlation between spending (e.g., marketing, R&D) and growth outcomes Discretionary Expenses: Watch for unusual spending patterns or inflated overheads, which may hide inefficiencies or fraud. Compare expense ratios to industry benchmarks to identify outliers. 4️⃣ Follow the Cash "Cash is king" isn't just a saying—it's a fundamental truth. Analyze the cash flow statement, focusing on operating cash flow. Does cash generation align with reported profits? If not, investigate why. Working Capital: Examine receivables, payables, and inventory turnover. High receivables or slow collections can strain liquidity. A company’s survival depends on cash, not profits, so inconsistencies here are critical. 5️⃣ Detect Red Flags in Accounting Practices Deep-dive into financial statement notes and management assumptions: Revenue Recognition Policies: Changes or overly aggressive assumptions can inflate top-line growth. Capitalization of Expenses: Are expenses being shifted to the balance sheet to boost short-term profitability Frequent “Non-Recurring” Charges: If restructuring costs, write-offs, or "one-time" adjustments recur year after year, take note. Off-Balance Sheet Items: Unrecorded liabilities or guarantees can inflate the company’s financial health. 6️⃣ Benchmark Against Peers Comparing the company to industry peers helps contextualize its performance. Look at: Margins: Are gross, operating, and net profit margins in line with the industry? Leverage: How does the debt-to-equity ratio compare Growth Rates: Is the company growing faster, slower, or on par with competitors Deviations can signal either unique strengths—or risks that need deeper investigation. LinkedIn LinkedIn Guide to Creating

I’ve built financial models for 10 years. Hundreds of spreadsheets. Thousands of formulas. But I keep coming back to the same 10. Here are my top Excel formulas for financial analysis (with examples): 𝟭. 𝗫𝗡𝗣𝗩 Net Present Value with irregular dates. → =XNPV(rate, values, dates) Real cash flows don’t happen on schedule. This handles that. 𝟮. 𝗫𝗜𝗥𝗥 Internal Rate of Return for irregular periods. → =XIRR(values, dates) The accurate way to measure investment returns. 𝟯. 𝗣𝗠𝗧 Calculate loan payments instantly. → =PMT(rate, nper, pv) Mortgages, leases, debt schedules — one formula. 𝟰. 𝗙𝗩 Future Value of an investment. → =FV(rate, nper, pmt, pv) Project growth with compound interest built in. 𝟱. 𝗦𝗨𝗠𝗜𝗙𝗦 Sum values based on multiple criteria. → =SUMIFS(sum_range, criteria_range1, criteria1, ...) Filter and sum in one step. No pivot needed. 𝟲. 𝗔𝗩𝗘𝗥𝗔𝗚𝗘𝗜𝗙𝗦 Average with conditions. → =AVERAGEIFS(avg_range, criteria_range1, criteria1, ...) Calculate average revenue by region, product, period. 𝟳. 𝗘𝗢𝗠𝗢𝗡𝗧𝗛 Find end of month dates. → =EOMONTH(start_date, months) Essential for monthly reporting and forecasting. 𝟴. 𝗜𝗙𝗘𝗥𝗥𝗢𝗥 Handle errors gracefully. → =IFERROR(formula, value_if_error) No more #DIV/0! breaking your reports. 𝟵. 𝗥𝗢𝗨𝗡𝗗 Control decimal precision. → =ROUND(number, decimals) Financial reports need clean numbers. Period. 𝟭𝟬. 𝗫𝗟𝗢𝗢𝗞𝗨𝗣 Pull data from anywhere. → =XLOOKUP(lookup_value, lookup_array, return_array) Connect datasets without breaking formulas. 𝗕𝗼𝗻𝘂𝘀 𝗖𝗼𝗺𝗯𝗼: =IFERROR(XIRR(values, dates), "Check data") Always wrap financial functions in IFERROR. Trust me. These 10 formulas handle 90% of financial modeling. Master them and you’ll outperform most analysts. Save this. You’ll need it. ♻️ Repost to help someone level up their finance game. Which formula do you use most? Drop a number 👇

Most financial analysis fails for a simple reason: people jump to ratios before they understand the business. Financial analysis is not a spreadsheet exercise. It’s a decision-making discipline. Here are 13 steps I’ve found helpful to keep analysis practical, structured, and connected to what matters: 1. Get the financial statements 2. Build business understanding 3. Clean and organize the data 4. Calculate the right ratios 5. Analyze trends over time 6. Benchmark against peers 7. Assess profitability drivers 8. Evaluate liquidity position 9. Review cash flow and free cash flow 10. Recommend actions 11. Write a clear report 12. Present the story behind the numbers 13. Update regularly A few observations from working with CFOs and finance teams: Step 2 is usually the biggest differentiator. If you don’t understand the business model and value drivers, the numbers will mislead you. Step 10 is where many analyses stop too early. Insight without action is just commentary. Step 13 is underrated. Analysis isn’t a one-off. It’s a feedback loop. If you want better financial analysis, focus less on technical complexity and more on structure, clarity, and decisions. Which step do you see finance teams skipping most often?

If you think data visualization and statistics don’t apply to FP&A -- consider just how much valuable information is hidden away in those financial processes. For instance, understanding not only the average days payable but also the variance around those payables can shed light on potential risks or opportunities. The same approach can be applied to other metrics, such as sales forecasts or overhead expenses: analyzing forecast accuracy, identifying anomalies, or even spotting correlations between different expense lines can significantly enhance strategic decision-making. Of course, transforming raw spreadsheets and disparate systems into a structured, analysis-ready format requires effort, but it pays off once those cleansed datasets are in place. With the right data visualization and statistical techniques, these metrics become more than just numbers on a page -- they become actionable insights that drive better decisions. FP&A actually benefits substantially from this kind of analysis, and those who overlook its potential may be missing out on valuable guidance. Embracing data analytics and visualization can help surface insights that might otherwise remain buried and give organizations a more comprehensive view of their financial health and future direction.

Most FP&A teams spend 80% of their time on data cleanup. The other 20%? Actually analyzing it. After leading FP&A at Squarespace, P&G, and Unilever, I learned this backwards ratio kills decision quality. So I created a framework that flips it. In my latest video, I break down the 5 fundamental building blocks every FP&A professional needs: 1. Data Organization That Actually Works → Why unique identifiers matter more than perfect spreadsheets → The chart of accounts review that saves weeks of analysis 2. The Clean Data Reality Check → My embarrassing story about conflicting "website visitor" definitions → How it almost derailed a critical leadership presentation 3. The 5 Financial Ratios Categories → From liquidity to market value → Which ones actually influence decisions (hint: not all of them) 4. Choosing Metrics That Matter → My 6-step process for working backwards from strategy → Why tracking everything = tracking nothing 5. Variance Analysis That Drives Action → The "What, Why, So What" framework → Real example: How we saved $267K on audit fees The best part? This isn't theoretical. These are the exact frameworks I teach at Wharton and use with Fortune 500 clients like Google, Merck, and Lowe's. Watch the full breakdown here on YouTube: https://lnkd.in/eCUS5Mdd P.S. In the video, I also share how to get my 10 most popular FP&A one-pagers free. These frameworks have helped 100K+ finance professionals level up their analysis game. Which one of the four aspects of financial analysis do you enjoy the most or the least (1. Data Organization, 2. Raising Data Quality, 3. Metric Selection, 4. Variance Analysis)? Drop it below 👇

Can you really know if your business is healthy? Because looking at sales alone won’t cut it.  And simply glancing at your bank balance is even more misleading.   Which is exactly what I saw with a SaaS founder doing $3M ARR. He swore his business was “killing it” because revenue was growing 30% YoY.   But when we ran a proper financial analysis, the cracks appeared: → Churn was erasing 20% of that growth → Gross margins slipped from 68% to 55% → Cash burn meant he had less than 6 months of runway That wake-up call helped him course-correct in time. Here are the 5 key steps to financial analysis I walk clients through: 1️⃣ Understand the Income Statement – Review revenue, expenses, and profitability trends 2️⃣ Dig into the Balance Sheet – Assess liquidity, assets, liabilities, and debt levels 3️⃣ Analyze Cash Flow – Spot whether operations generate enough cash to sustain growth 4️⃣ Use Ratios – Gross margin, current ratio, debt-to-equity, return on assets 5️⃣ Compare Over Time – Track trends, not just single numbers Done right, financial analysis doesn’t just show where you are. It shows where you’re heading and whether you’ll get there safely. Business owners don't just grow. Analyze. #financialanalysis  #finance  #businessgrowth

Many financial analysts kick off their examination of financial statements with a two-pronged approach: Vertical and horizontal analysis.   📊 Vertical Analysis   This technique tackles the question: "How does this company's performance during a specific period compare to others in the same industry?" The key here is establishing a base number for each statement:   Income Statement: Typically, total revenue is used as the base or denominator for the analysis. This serves as a yardstick against which all other accounts are measured. It's akin to a financial magnifying glass that reveals whether costs are higher or lower than industry standards or budgeted.   Balance Sheet: For balance sheets, the focus shifts to how assets, liabilities, and equity contribute to the total asset composition (the base). This evaluation is critical for assessing liquidity, solvency, and the company's capital structure.   Statement of Cash Flows: In this statement, vertical analysis helps us grasp the sources and applications of cash by examining the percentage of cash flows from operations, investing, and financing activities. Typically, net operating cash flow is used as the base, as it's the heartbeat of the company, influenced by factors like net income, working capital, and management's day-to-day operations decisions.   📈 Horizontal Analysis   Contrastingly, horizontal analysis tracks increases in each account from one period to another. This is why vertical analysis is about comparing accounts up and down the statements (across different accounts), while horizontal analysis is about observing changes from left to right (over time).   Income Statement: Horizontal analysis here unveils revenue growth, expense trends, and margin fluctuations year over year. It's a tool for assessing consistency, particularly when it comes to Compound Annual Growth Rate (CAGR). CAGR smoothes out the annualized growth rate over a set period, helping us identify trends, including periods of rapid growth or decline.   Balance Sheet: Tracking changes in assets and liabilities year over year allows management to explain their financial position performance. Particularly, improvements in current assets and liabilities can indicate how well-prepared a company is to weather financial challenges.   Statement of Cash Flows: On the cash flow front, horizontal analysis highlights changes in cash flow, offering insights into management's priorities within the three cash flow buckets: operations, investing, and financing.   By combining these analytical tools, financial analysts can paint a detailed picture of a company's financial health, projecting future trends in terms of margin proportions and cash flow from vertical analysis, and most critically, assessing growth from horizontal analysis.   These techniques are my go-to for every model and report I build, and they should be a staple in your financial analysis toolkit as well!   #StartupConsulting #FinancialModeling #RevenueRick #RobynCG

The Balance Sheet is the most valuable Financial Statement, yet most businesses ignore them. Here is what the Balance Sheet teaches you and how to analyze it: The Balance Sheet formula is: Assets = Liabilities + Equity Rework that formula and you get Assets - Liabilities = Equity What you own - what you owe = book value of the business. In this way, it’s answering the question, is this business healthy? A book value < 0 = Accounting Insolvency But Accounting Insolvency is just a book number; you might still be able to meet your obligations with cash flows. Good? No… but not cash flow insolvency, where you can’t meet your short or long-term obligations. The Balance Sheet is broken into 3 sections: • Assets: what you own • Liabilities: what you owe • Equity: the difference Both Assets & Liabilities are further broken down into short-term (less than year) or long-term (more than year hold or maturity). The Equity section is broken into these components: • Common stock (initial capital investment) • Owner’s contributions • Owner’s distributions • Retained earnings • Current Year Net Income Current Year Net Income from the Income Statement shows up in the equity section. Every year, that balance is zeroed out and rolled in Retained Earnings, which is a reflection of historical earnings of the business. To analyze this statement, you’re going to do two types of analysis: • Horizontal • Ratio Horizontal Analysis is looking at the change between a past period and the current period. That can be past month, quarter, or year. With Ratio Analysis, you’ll look for benchmarks as well as trends. Some common types of ratios are: • Liquidity Ratios These ratios measure your ability to turn assets into cash. Some favorites are: - Current Ratio or Quick Ratio - Cash Burn Rate / Cash Runway - Cash Conversion Cycle • Solvency Ratios These ratios show your ability to pay-off debts. Some common ones are: - Debt-to-equity Ratio - Interest Coverage Ratio - Debt Service Coverage Ratio • Return on Ratios These tell you what your return on investment is. Trying to use your assets efficiently? Use Return on Assets (ROA) Looking to measure financial efficiency compared to competitors? Return on Equity (ROE) Wonder how efficiently you’ve deployed investor capital? Return on Invested Capital (ROIC) Want to understand how well current capital is utilized (especially in capital-intensive industries)? Return on Capital Employed (ROCE) You should NEVER use all of these ratios. Choose the specific analysis tools that are best for your business and watch: • trends • thresholds When a trend turns bad or a threshold number is broken, dive deeper and determine why. Thanks for reading! If you’re a business owner and want to be able to use your financials as a decision-making tool, check out my cohort (it starts March 11th): https://lnkd.in/gXMntDyz

While analyzing Financials Pay Less attention to the P&L and  More to Balance Sheet + Cash Flows We are tuned to look at  - Sales growth - Profit growth - EBITDA Margins Whereas the real analysis is needed on - Why is sales growing? - Why are margins moving the way they are - Is the growth sustainable? - Are receivables telling us something - Is the company generating enough cash - Is the business capital intensive - Can the business fund its capex - What is the working capital cycle - What kind of leverage does the firm have and so on Most people focus on the profit and loss.  Quarterly earnings, Margins And don't get me wrong - these are necessary. But the disproportionate time spent on the P&L is not necessary. Deeper understanding of the business comes from the other financial statements. Focus as much on them atleast as much as you do on the P&L ----- Peeyush Chitlangia, CFA I help you build a career in valuation and investment banking Do reach out if you need guidance around the same