Accounting Ratios — Claude Skill

Use this skill when helping students with the Performance Ratios project (company selection, Excel model building, specification writing, or final analysis). Activate when working in courses/International-Corporate-Finance/projects/performance-ratios/. This project is currently taught as BUS 629 (Vietnam EMBA); the original BUS-314 (undergrad) iteration is archived at _archive/bus314/accounting-ratios/.

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Named Range Conventions

• Balance Sheet: BAL_[item]_[year] (e.g., BAL_assets_total_2024)
• Income Statement: INC_[item] (e.g., INC_sales, INC_ebit, INC_net)
• Cash Flow: CASH_[item] (e.g., CASH_operating)
• Market/Analyst: share_price, shares_outstanding, cost_capital, tax_rate
• Derived (start of year): startYear_[item]
• Derived (current year): currentYear_[item]
• Derived (averages): avg_[item]
• Ratios: RATIO_[name] (e.g., RATIO_asset_turnover)

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Key Formulas (Pseudocode)

Derived Inputs

• market_capitalization = share_price * shares_outstanding
• currentYear_after_tax_operating_income = INC_net + (1 - tax_rate) * INC_interest_expense
• currentYear_daily_sales_average = INC_sales / 365
• avg_equity = AVERAGE(startYear_equity, currentYear_equity)

Performance

• MVA = market_capitalization - currentYear_equity
• Market-to-Book = market_capitalization / currentYear_equity
• EVA = currentYear_after_tax_operating_income - (cost_capital * startYear_total_capitalization)

Profitability

• ROA = currentYear_after_tax_operating_income / startYear_total_assets
• ROC = currentYear_after_tax_operating_income / startYear_total_capitalization
• ROE = INC_net / startYear_equity

Efficiency

• Asset Turnover = INC_sales / startYear_total_assets
• Inventory Turnover = INC_cost_goods_sold / startYear_inventory
• Profit Margin = INC_net / INC_sales
• Operating Profit Margin = currentYear_after_tax_operating_income / INC_sales

Leverage

• Long-term Debt Ratio = currentYear_debt_long_term / (currentYear_debt_long_term + currentYear_equity)
• Times Interest Earned = INC_ebit / INC_interest_expense
• Leverage Ratio = currentYear_assets_total / currentYear_equity

Liquidity

• Current Ratio = currentYear_assets_current / currentYear_liabilities_current
• Quick Ratio = (currentYear_cash_marketable_securities + BAL_receivables_current) / currentYear_liabilities_current

Du Pont

• Du Pont ROA = RATIO_asset_turnover * RATIO_operating_profit_margin
• Du Pont ROE = RATIO_leverage * RATIO_asset_turnover * RATIO_operating_profit_margin * RATIO_debt_burden

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Reference Spreadsheet

Master class spreadsheet with all ratio formulas and a worked example. The BUS-314 copy is archived (superseded by docs/spreadsheets/Corporate Finance Master Spreadsheets.xlsx, which is now the current reference — see docs/decisions/2026-07-08-generic-course-directory-naming.md item 5):
docs/spreadsheets/Corporate Finance Master Spreadsheets.xlsx

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How to Help Students

The current (BUS 629) iteration uses a 6-stage workflow (Stage 0 through Stage 5) — see stage0-repo-setup.md … stage5-llm-analysis-evaluation.md in courses/International-Corporate-Finance/projects/performance-ratios/ for the exact deliverables and rubric per stage. In broad strokes:

1. Repo setup: GitHub repo + collaborator access.
2. Template architecture: Familiarize with the named-range Excel template (see conventions below).
3. Company selection memo: Help frame the company choice and explain why ratio analysis matters. Keep it executive-friendly.
4. Model population + validation: Help build or debug the spreadsheet. Validate Du Pont decompositions match direct calculations. Use named ranges consistently.
5. Technical specification: Help document the model with post-build reflection. Use pseudocode, not cell references.
6. LLM analysis evaluation: Help interpret ratios and formulate actionable recommendations, and critically evaluate LLM-generated analysis against the model's actual numbers.

The archived BUS-314 iteration used a simpler 4-stage workflow (Memo, Excel Build, Spec, Final Analysis) — if helping with that legacy material, follow its own stage docs in _archive/bus314/accounting-ratios/ rather than the mapping above.

Important Notes

• AI tools are optional, not required for any stage of this project.
• Students must document AI usage per course guidelines (docs/ai-usage-guidelines.md).
• Financial data should come from real SEC filings or reputable financial data sources.
• Avoid banks, insurance companies, and REITs — their financial statements don't align with these ratios.