Onion Financial Analysis Method Explained
"Seeing Through Financial Statements: The Onion Financial Analysis Method" innovatively proposes a three-layer financial deconstruction framework, using accessible case studies to unveil the operational truths behind corporate financial data:
Core Methodology
Practical Tools
Mindset Revolution
It emphasizes transitioning from a "data consumer" to a "financial skeptic," establishing three major defense mechanisms:
Through 50+ real case studies of listed companies, the book transforms professional financial analysis into a reusable business insight tool, suitable for investors and corporate managers to enhance their financial immunity.
Build personal analysis templates (author-provided templates for industries like baijiu/healthcare)
Use common sense to test the reasonableness of numbers (e.g., sudden changes in gross profit margin)
Maintain vigilance towards standard formats (e.g., subsidiary data in consolidated statements)
Health Indicator: Operating cash flow/Net profit ratio ≥1 is the safety threshold
Footnote Mining Techniques: Focus on changes in accounting policies, disclosure of related-party transactions
Abnormal Pattern Detection: Horizontal comparison with industry average + vertical tracking of 5-year data
Industry Essence Perspective
Case comparison of Haitian Flavoring & Food Co., Ltd./Jinlongyu:
High gross margin in the condiment industry vs. small profits but quick turnover in the grain and oil industry
Mineral water cost structure (packaging accounts for over 60%)
Business Process Tracing
Deduce four major operational links through financial data:
Raw material procurement (abnormal accounts payable turnover ratio)
R&D investment (capitalization rate compared with peers)
Product production (sudden change in inventory turnover days)
Product sales (accounts receivable aging analysis)
Surface Data Deconstruction
Deconstruct key items of the three statements:
Balance Sheet: Identify methods of inflating assets (related-party transactions/expense capitalization)
Income Statement: Reveal timing games (manipulation of revenue recognition timing/profit smoothing)
Cash Flow Statement: Verify earnings quality (warning signs of divergence between operating cash flow and net profit)
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