free cash flow quality scanner

The problem

Net income is easily manipulated through accounting accruals and one-time items, hiding the actual liquidity of a business. Relying on earnings alone fails to show if a company is generating real cash or just growing its receivables and inventory.

What it does

• Calculates Free Cash Flow (FCF) and cash flow margins across multiple reporting periods.
• Evaluates OCF-to-Net Income conversion to detect aggressive accounting or hidden earnings quality issues.
• Computes solvency metrics including cash interest coverage, debt coverage, and current liability coverage.
• Benchmarks capital expenditure efficiency and cash returns on assets and equity.
• Scores overall cash flow sustainability on a 0-100 scale to identify distressed or high-risk profiles.

Why this beats prompting it yourself

Standard prompts often confuse Operating Cash Flow with Free Cash Flow or miss the nuance of working capital adjustments. This skill applies a specific 100-point scoring framework and systematically checks for red flags like asset sales masking weak operations, ensuring no solvency ratio is overlooked.

Use cases

• Perform due diligence on investment targets by auditing cash sustainability.
• Analyze competitor financial health beyond surface-level earnings reports.
• Identify "earnings quality" red flags where profit exists but cash does not.
• Assess a company's ability to service debt or maintain dividends from operations.

Known limitations

Does not provide investment advice. Requires at least 2-3 years of financial statements for meaningful trend analysis.