Reviews earnings quality before valuation when structured financial statements are available; optional notes improve confidence. Requires supplied data only...
--- name: earnings-quality-reviewer description: Reviews earnings quality before valuation when structured financial statements are available; optional notes improve confidence. Requires supplied data only and performs no direct data fetching. compatibility: Requires structured financial statements and optional notes; no direct data fetching. --- # Earnings Quality Reviewer ## Purpose Assess whether reported earnings are reliable enough to support valuation conviction. ## Scope - Income statement. - Balance sheet. - Cash flow statement. - Profitability, liquidity, leverage, and efficiency ratios. - Financial statement notes. - One-offs and non-recurring items. - Related-party notes. - Debt maturity notes. ## Non-goals - No data fetching. - No fabrication of missing notes. - No absolute buy/sell instructions. ## Input contract Provide structured financials and optional notes: - Income statement line items, including revenue, gross profit, operating profit, finance cost, tax, net income, and non-recurring items when available. - Balance sheet line items, including cash, receivables, inventory, current assets, debt, payables, current liabilities, equity, and total assets. - Cash flow line items, including cash flow from operations, capital expenditure, free cash flow, financing cash flows, and material working-capital movements. - Ratios or enough raw fields to compute ratios. - Optional notes covering accounting policy changes, related-party transactions, debt maturities, contingencies, and management adjustments. ## Data quality gate Before reviewing earnings quality, assess: - Statement freshness: whether statement dates are current enough for the valuation date. - Missing lines: whether key income statement, balance sheet, or cash flow lines are absent. - Cash-flow completeness: whether operating cash flow, capital expenditure, and free cash flow are available or can be derived. - Notes availability: whether notes are supplied for accounting policies, one-offs, related parties, contingencies, and debt maturities. If the data gate fails, still provide a review when possible, but lower confidence and list the gaps in the handoff bundle. ## Review checklist - Cash conversion: compare net income with operating cash flow and free cash flow across the available period. - Accrual risk: identify large earnings-without-cash patterns, margin expansion without cash support, capitalization concerns, or abnormal non-cash items. - Working capital pressure: review receivables, inventory, payables, current ratio trends, and cash conversion cycle signals when available. - Leverage/refinancing risk: assess debt load, short-term maturities, interest burden, covenant or liquidity pressure, and refinancing dependence. - One-off adjustments: separate recurring earnings power from asset sales, impairments, restructuring charges, tax effects, FX effects, and other non-recurring items. - Governance/accounting red flags: flag related-party transactions, accounting policy changes, auditor concerns, restatements, unusually aggressive assumptions, and unexplained note gaps. ## Required output format Use exactly these sections: 1. `Input Quality` 2. `Earnings Quality Score` 3. `Cash Conversion and Accruals` 4. `Balance Sheet and Working Capital` 5. `One-Offs and Accounting Red Flags` 6. `Valuation Confidence Impact` 7. `Handoff Bundle` ## Shared confidence rubric - `High`: fresh statements, complete income statement, balance sheet, and cash flow data, notes available, consistent cash conversion, limited accrual concerns, and no material unresolved red flags. - `Medium`: usable statements and cash-flow data, but notes are incomplete, one major line group is limited, or there are moderate unresolved earnings-quality concerns. - `Low`: stale statements, missing cash-flow data, missing notes, major unexplained accruals, significant working-capital stress, refinancing risk, or material accounting/governance red flags. ## Guardrails - Separate facts, assumptions, and inference. - Do not fabricate missing line items, notes, explanations, or management intent. - Cap confidence at `Medium` when relevant notes are missing. - Treat red flags as valuation-risk inputs, not trading commands. - Use cautious language when the evidence is incomplete or mixed. ## Handoff bundle Include these exact markers: - `ticker` - `as_of_date` - `earnings_quality_tier` - `cash_conversion` - `accrual_risk` - `working_capital_pressure` - `leverage_refinancing_risk` - `one_off_adjustments` - `red_flags` - `valuation_confidence_impact` - `data_gaps` ## Trigger examples - "Review earnings quality before I run valuation." - "Check whether these reported profits are cash-backed." - "Assess accrual risk and working-capital pressure from these statements." - "Prepare an earnings-quality handoff for the valuation model."
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by @clawhub
restructured original into six-component format with explicit procedure steps, decision-point branches for data quality gates and red flag escalation, detailed input specifications including edge cases, and comprehensive output contract with handoff bundle markers; preserved original checklist and confidence rubric.
assess whether reported earnings are reliable enough to support valuation conviction. use this skill when you have structured financial statements (income statement, balance sheet, cash flow) and want to surface accrual risk, working capital stress, leverage concerns, and accounting red flags before running a valuation. the skill takes no external data feeds, only what you supply.
structured financial statements (required):
optional notes (improve confidence):
metadata:
edge cases to flag:
validate input completeness (explicit gate step).
assess statement freshness and data quality (explicit inputs/outputs).
compute or collect key ratios (explicit inputs/outputs).
examine cash conversion and accrual risk (explicit inputs/outputs).
assess working capital and liquidity pressure (explicit inputs/outputs).
examine leverage, debt maturity, and refinancing risk (explicit inputs/outputs).
identify and categorize one-off and non-recurring items (explicit inputs/outputs).
flag governance, accounting, and auditor red flags (explicit inputs/outputs).
synthesize earnings quality score and confidence rating (explicit inputs/outputs).
compose handoff bundle (explicit inputs/outputs).
exact output sections (in this order):
Input Quality
Earnings Quality Score
Cash Conversion and Accruals
Balance Sheet and Working Capital
One-Offs and Accounting Red Flags
Valuation Confidence Impact
Handoff Bundle
ticker: entity identifier.as_of_date: statement date (YYYY-MM-DD).earnings_quality_tier: high / medium / low.cash_conversion: strong / moderate / weak (or n/a if data unavailable).accrual_risk: low / moderate / high.working_capital_pressure: low / moderate / high.leverage_refinancing_risk: low / moderate / high.one_off_adjustments: materiality tier (low / moderate / high) and count of items.red_flags: list of critical and moderate flags (empty list if none).valuation_confidence_impact: positive / neutral / negative (and discount-rate or haircut delta, if applicable).data_gaps: list of missing statements or critical notes (empty list if none).data format:
the skill has worked when: