Module 04 · Financial Statement Analysis¶
What this module does. Converts statements into judgement: growth (and what it costs), margins and cost structure, returns on capital, working capital and cash conversion, leverage and liquidity, per-share metrics and a full ratio dashboard, and the quality of earnings. Every lesson works Kaveri Pumps FY21–FY26 and ends with the conclusion the numbers support.
Why it matters. This is the analytical core of fundamental investing: the ratios that distinguish a business that compounds from one that merely grows, and profit that is real from profit that is reported.
Lessons¶
| # | Lesson | One line | Time |
|---|---|---|---|
| 04.1 | Growth analysis | Decomposing growth; base effects; growth at what cost | 75 min |
| 04.2 | Margins & cost structure | Common-size statements; fixed/variable; operating leverage; pass-through; margin bridges | 90 min |
| 04.3 | Returns on capital | ROE, ROCE, ROIC done right; DuPont; incremental ROIC; the reinvestment identity | 100 min |
| 04.4 | Working capital & cash conversion | Days ratios, CCC, NWC intensity, CFO/EBITDA, FCF, maintenance vs growth capex | 90 min |
| 04.5 | Leverage, solvency & liquidity | Debt ratios, coverage, maturity ladders, off-balance-sheet items, ratings | 90 min |
| 04.6 | Per-share metrics & the ratio dashboard | EPS/BVPS/DPS; the 6-year dashboard read as a story; peer comparison; Screener quirks | 75 min |
| 04.7 | Quality of earnings | Accruals; recurring vs one-off; the quality scorecard | 90 min |
Connections¶
- Back: Module 02 (what the lines mean); Module 03 (where the inputs come from).
- Forward: returns and reinvestment feed 06.1; working capital and leverage feed 06.3 and 10.3; quality of earnings opens Module 09.
- Tools:
tools/fi/ratios.py(ratio_dashboard,dupont_3/5,working_capital_days) reproduces every table.
You're ready to move on when you can…¶
- Decompose Kaveri's growth by segment and state what it cost in capital.
- Build a common-size P&L, estimate DOL and run a mix/rate margin bridge.
- Compute ROE, ROCE and ROIC on averages with correct denominators, run a 5-step DuPont, and compute incremental ROIC.
- Compute the cash conversion cycle, CFO/EBITDA and FCF, and estimate maintenance capex.
- Assess leverage, coverage and liquidity, and find off-balance-sheet obligations in the notes.
- Read a 6-year ratio dashboard top to bottom as a narrative, and score earnings quality.
Tested by: Mock 2 — Analysis & business quality and Drill — Unidentified industries.