
finance
Financial analysis expertise for financial modeling (DCF, LBO, M&A), valuation, financial statement analysis, capital allocation, treasury management, and corporate finance decisions. Use when building financial models, analyzing statements, or making investment decisions.
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Install
Works with every agent the skills CLI supports.
npx skills add https://github.com/travisjneuman/.claude --skill finance- 01
Install
Run the command in your project. The CLI asks which agents to install for.
- 02
Describe the task
Ask your agent for something this skill covers. It loads finance automatically when relevant.
- 03
Review the result
The agent follows the SKILL.md steps, scripts and references bundled with the skill.
SKILL.md
The instructions your agent reads when the skill is triggered.
Financial Analysis Expert
Comprehensive financial frameworks for modeling, valuation, and corporate finance decisions.
Financial Statement Analysis
DuPont Analysis (5-Factor)
Decompose ROE into operational drivers:
ROE = Net Profit Margin x Asset Turnover x Equity Multiplier
Extended (5-Factor):
ROE = (EBIT/Sales) x (Sales/Assets) x (Assets/Equity) x (EBT/EBIT) x (NI/EBT)
= Operating Margin x Asset Turnover x Leverage x Interest Burden x Tax Burden
Key Financial Ratios
| Category | Ratio | Formula | Benchmark |
|---|---|---|---|
| Profitability | Gross Margin | Gross Profit / Revenue | Industry specific |
| Operating Margin | EBIT / Revenue | 15-25% (varies) | |
| Net Margin | Net Income / Revenue | 10-20% (varies) | |
| ROIC | NOPAT / Invested Capital | > WACC | |
| ROE | Net Income / Equity | 15-20%+ | |
| Liquidity | Current Ratio | Current Assets / Current Liabilities | 1.5-2.0x |
| Quick Ratio | (CA - Inventory) / CL | 1.0x+ | |
| Cash Ratio | Cash / Current Liabilities | 0.2-0.5x | |
| Leverage | Debt/Equity | Total Debt / Total Equity | < 1.0x |
| Debt/EBITDA | Total Debt / EBITDA | 2-3x (IG), 4-6x (HY) | |
| Interest Coverage | EBIT / Interest Expense | > 3x | |
| Efficiency | Asset Turnover | Revenue / Total Assets | Industry specific |
| Inventory Days | Inventory / (COGS/365) | Industry specific | |
| DSO | AR / (Revenue/365) | 30-45 days | |
| DPO | AP / (COGS/365) | 30-60 days |
Cash Flow Analysis
FREE CASH FLOW (FCF):
Operating Cash Flow
- Capital Expenditures
= Free Cash Flow
UNLEVERED FREE CASH FLOW (for valuation):
EBIT
x (1 - Tax Rate)
= NOPAT
+ Depreciation & Amortization
- Change in Working Capital
- Capital Expenditures
= Unlevered Free Cash Flow
LEVERED FREE CASH FLOW:
Unlevered FCF
- Interest Expense x (1 - Tax Rate)
- Mandatory Debt Repayments
+ Net Borrowing
= Levered Free Cash Flow
Valuation Methodologies
Discounted Cash Flow (DCF)
ENTERPRISE VALUE:
T UFCFt Terminal Value
EV = Σ ─────────── + ─────────────────────
t=1 (1+WACC)^t (1+WACC)^T
TERMINAL VALUE (Perpetuity Growth):
UFCF(T+1)
Terminal Value = ───────────
WACC - g
TERMINAL VALUE (Exit Multiple):
Terminal Value = EBITDA(T) x Exit Multiple
EQUITY VALUE:
Equity Value = Enterprise Value - Net Debt + Cash
DCF Model Template
| Year | 1 | 2 | 3 | 4 | 5 | Terminal |
|---|---|---|---|---|---|---|
| Revenue | ||||||
| Growth % | ||||||
| EBITDA | ||||||
| Margin % | ||||||
| D&A | ||||||
| EBIT | ||||||
| Tax | ||||||
| NOPAT | ||||||
| + D&A | ||||||
| - CapEx | ||||||
| - NWC Change | ||||||
| UFCF | ||||||
| Discount Factor | ||||||
| PV of UFCF |
Comparable Company Analysis
TRADING MULTIPLES:
- EV/Revenue
- EV/EBITDA
- EV/EBIT
- P/E
- P/B
SELECTION CRITERIA:
1. Industry/sector alignment
2. Size (revenue, market cap)
3. Growth profile
4. Profitability profile
5. Geographic exposure
6. Capital structure
ADJUSTMENTS:
- Control premium (20-30% for acquisition)
- Liquidity discount (10-30% for private)
- Size discount (10-20% for smaller)
Precedent Transaction Analysis
TRANSACTION MULTIPLES:
- EV/LTM Revenue
- EV/LTM EBITDA
- EV/NTM EBITDA
- Transaction Premium to unaffected price
ADJUSTMENTS:
- Market conditions at time of deal
- Strategic vs. financial buyer
- Competitive auction vs. negotiated
- Synergy assumptions baked in
Sum-of-the-Parts (SOTP)
METHODOLOGY:
1. Identify distinct business segments
2. Value each segment independently
3. Apply segment-specific multiples/DCF
4. Sum segment values
5. Subtract corporate costs (capitalized)
6. Adjust for holding company discount (10-20%)
CONGLOMERATE DISCOUNT FACTORS:
- Complexity premium demanded by investors
- Capital allocation inefficiencies
- Management distraction
- Lack of pure-play comparables
Leveraged Buyout (LBO) Analysis
LBO Model Structure
SOURCES & USES:
Sources:
- Senior Debt (Term Loan A/B)
- Subordinated Debt (Mezz, High Yield)
- Equity Contribution
Uses:
- Purchase Price
- Refinance Existing Debt
- Transaction Fees
- Cash to Balance Sheet
KEY METRICS:
- Entry Multiple: EV / LTM EBITDA
- Exit Multiple: Assumed sale multiple
- Equity IRR: Target 20-25%+
- Cash-on-Cash: 2.0-3.0x in 5 years
- MOIC: Multiple of Invested Capital
LBO Returns Framework
| IRR Target | Hold Period | Required MOIC |
|---|---|---|
| 20% | 3 years | 1.7x |
| 20% | 5 years | 2.5x |
| 25% | 3 years | 2.0x |
| 25% | 5 years | 3.0x |
Value Creation Sources
% of Total Returns (typical)
EBITDA Growth 40-50%
- Revenue growth
- Margin improvement
Multiple Expansion 20-30%
- Market timing
- Operational improvement
- Strategic repositioning
Debt Paydown 20-30%
- Cash flow generation
- Working capital improvement
M&A Financial Analysis
Accretion/Dilution Analysis
STANDALONE EPS (Acquirer):
Net Income / Shares Outstanding = EPS
PRO FORMA EPS:
(Combined Net Income - Synergies + Interest Cost) / New Shares = PF EPS
ACCRETION/(DILUTION):
(PF EPS - Standalone EPS) / Standalone EPS = %
BREAKEVEN SYNERGIES:
Synergies needed to make deal EPS neutral
Synergy Analysis
| Synergy Type | Typical Range | Realization Timeline |
|---|---|---|
| Cost Synergies | 5-15% of target costs | 1-3 years |
| Revenue Synergies | 2-5% of combined revenue | 2-5 years |
Deal Structure Considerations
CONSIDERATION:
- Cash: Immediate value, tax implications
- Stock: Alignment, dilution, tax deferral
- Mixed: Balance of above
FINANCING:
- Debt capacity analysis
- Credit rating implications
- Optimal capital structure
- Bridge financing needs
Capital Allocation Framework
Capital Allocation Hierarchy
1. MAINTAIN CORE BUSINESS
- Maintenance CapEx
- Working capital
- Required debt service
2. INVEST IN GROWTH
- Growth CapEx (> WACC hurdle)
- M&A (strategic fit + returns)
- R&D / Innovation
3. RETURN TO SHAREHOLDERS
- Dividends (sustainable payout)
- Share repurchases (below intrinsic value)
4. BUILD FLEXIBILITY
- Cash reserves
- Debt capacity
- Strategic optionality
Investment Hurdle Rates
| Investment Type | Typical Hurdle | Risk Premium |
|---|---|---|
| Maintenance CapEx | WACC | None |
| Growth CapEx | WACC + 2-3% | Low |
| Domestic M&A | WACC + 3-5% | Medium |
| International M&A | WACC + 5-8% | High |
| Venture/Innovation | 25-30% IRR | Very High |
ROIC vs WACC Framework
VALUE CREATION:
ROIC > WACC → Value creating
ROIC = WACC → Value neutral
ROIC < WACC → Value destroying
ECONOMIC PROFIT:
Economic Profit = (ROIC - WACC) x Invested Capital
SPREAD ANALYSIS:
Track ROIC-WACC spread over time
Target: Positive and expanding spread
Treasury & Risk Management
Working Capital Management
CASH CONVERSION CYCLE:
CCC = DSO + DIO - DPO
DSO (Days Sales Outstanding) = AR / (Revenue/365)
DIO (Days Inventory Outstanding) = Inventory / (COGS/365)
DPO (Days Payable Outstanding) = AP / (COGS/365)
OPTIMIZATION LEVERS:
- Accelerate collections (DSO reduction)
- Improve inventory turns (DIO reduction)
- Extend payment terms (DPO increase)
- Supply chain financing
Hedging Strategies
| Risk Type | Hedging Instruments | Strategy |
|---|---|---|
| FX Risk | Forwards, Options, Swaps | Natural hedging, rolling hedge |
| Interest Rate | Swaps, Caps, Floors | Fixed/floating mix |
| Commodity | Futures, Options | Cost certainty for inputs |
| Credit | CDS, Insurance | Counterparty protection |
Capital Structure Optimization
OPTIMAL CAPITAL STRUCTURE:
Balance:
- Tax shield benefits of debt
- Bankruptcy/distress costs
- Financial flexibility
- Credit rating implications
CREDIT METRICS TARGETS:
Investment Grade:
- Debt/EBITDA: 2-3x
- Interest Coverage: > 5x
- FFO/Debt: > 30%
High Yield:
- Debt/EBITDA: 4-6x
- Interest Coverage: > 2x
- FFO/Debt: 15-25%
Investor Relations
Earnings Call Preparation
KEY COMPONENTS:
1. Prepared remarks (10-15 min)
- Financial highlights
- Operational performance
- Strategic updates
- Guidance
2. Q&A preparation
- Anticipated questions
- Approved responses
- Escalation protocols
3. Supplemental materials
- Earnings release
- Investor presentation
- Financial supplement
Guidance Framework
| Guidance Type | Frequency | Specificity |
|---|---|---|
| Revenue | Quarterly | Range |
| EPS | Quarterly | Range |
| Cash Flow | Annual | Target |
| CapEx | Annual | Range |
| Long-term Targets | Investor Day | Directional |
Financial Planning & Analysis
Rolling Forecast Model
FREQUENCY: Monthly or Quarterly
HORIZON: 12-18 months rolling
COMPONENTS:
- Revenue by segment/product
- Gross margin drivers
- Operating expense detail
- Working capital assumptions
- CapEx plan
- Cash flow projection
VARIANCE ANALYSIS:
- Budget vs. Actual
- Prior forecast vs. Current
- Volume vs. Price vs. Mix
Budget Process Timeline
| Phase | Timing | Activities |
|---|---|---|
| Strategic Planning | Q2 | Long-range plan update |
| Guidance Setting | Q3 | Preliminary targets |
| Detailed Budgeting | Q3-Q4 | Bottom-up plans |
| Review & Approval | Q4 | Executive/Board approval |
| Communication | Q4 | Cascaded targets |
See Also
- Business Strategy
- Risk Management
- Operations
FAQ
What does the finance skill do?
Financial analysis expertise for financial modeling (DCF, LBO, M&A), valuation, financial statement analysis, capital allocation, treasury management, and corporate finance decisions. Use when building financial models, analyzing statements, or making investment decisions.
How do I install finance?
Run npx skills add https://github.com/travisjneuman/.claude --skill finance in your project. The skills CLI detects the agents you use and copies the skill into the right folder. For Claude Code you can also place the skill folder at ~/.claude/skills/finance/ (personal) or .claude/skills/finance/ (project).
Which AI agents can use finance?
Any agent that supports the open Agent Skills format (a folder with a SKILL.md file), including Claude Code, Codex, Cursor, GitHub Copilot, Gemini CLI, Windsurf, Cline, OpenCode and more.
Is finance safe to install?
No partner security audit is available yet. Skills can run commands and scripts, so read the SKILL.md and any bundled files before installing.
Who maintains finance?
It is published by travisjneuman in travisjneuman/.claude. It has 376 recorded installs.
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