How to Use ChatGPT for Financial Analysis: A Practical Guide

Financial analysis has traditionally required specialized software, extensive training, and hours of manual calculation. While these fundamentals remain important, ChatGPT can now serve as a powerful assistant for many financial analysis tasks—helping you work faster, catch insights you might miss, and communicate findings more effectively.

This guide walks you through practical ways to use ChatGPT for financial analysis, complete with ready-to-use prompts and important caveats to keep in mind.

Setting Up ChatGPT for Finance Work

Before diving into specific analyses, let's establish how to configure ChatGPT for financial work.

Choose the Right Model

For financial analysis, you'll want to use GPT-4 or later models when possible. These models handle numerical reasoning better and are less likely to make calculation errors. If you're using the free tier, be aware that GPT-3.5 may occasionally produce arithmetic mistakes.

Establish Context at the Start

Begin each session by telling ChatGPT what kind of financial work you're doing:

Setup prompt:

"I'm a financial analyst working on [quarterly earnings analysis/investment research/business valuation]. I'll be sharing financial data with you. Please be precise with numbers, show your calculations when doing math, and flag any assumptions you make. If you're uncertain about something, tell me rather than guessing."

This primes ChatGPT to be more careful and transparent—essential qualities for financial work.

Data Formatting Tips

When sharing financial data with ChatGPT:

• Use tables or clear formatting — Copy data from spreadsheets in a structured format
• Include units and time periods — "$5.2M revenue (Q3 2024)" is better than just "5.2"
• Specify the currency — USD, EUR, etc.
• Note any non-standard items — One-time charges, accounting changes, etc.

Analyzing Financial Statements

One of ChatGPT's strongest use cases is helping you interpret and analyze financial statements.

Income Statement Analysis

Prompt template:

"Here's the income statement data for [Company Name] for [time period]:

[Paste your data]

Please analyze this income statement and identify:

1. Revenue trends and growth rates
2. Gross margin and operating margin changes
3. Any concerning expense trends
4. Key drivers of profitability changes

Present your findings in a structured format with specific numbers."

Example output you might get: ChatGPT will typically break down the analysis by line item, calculate year-over-year changes, and highlight significant movements. It excels at spotting patterns humans might miss when scanning large tables.

Balance Sheet Analysis

Prompt template:

"Analyze this balance sheet for [Company Name]:

[Paste balance sheet data]

Focus on:

1. Liquidity position (current ratio, quick ratio)
2. Debt levels and leverage trends
3. Working capital management
4. Asset composition changes

Calculate the relevant ratios and explain what they indicate about the company's financial health."

Cash Flow Statement Analysis

Prompt template:

"Review this cash flow statement:

[Paste cash flow data]

Analyze:

1. Quality of earnings (operating cash flow vs. net income)
2. Capital expenditure patterns
3. Free cash flow generation
4. Financing activities and their implications

Highlight any red flags or positive signals."

Comparative Analysis

ChatGPT is particularly useful for comparing financial statements across periods or companies:

"Compare the financial performance of [Company A] and [Company B] based on these statements:

[Company A data] [Company B data]

Create a side-by-side comparison focusing on profitability, growth, and financial stability. Which company appears stronger and why?"

Creating Financial Projections

While ChatGPT shouldn't replace proper financial modeling, it can help you build reasonable projections and think through assumptions.

Revenue Forecasting

Prompt template:

"Based on this historical revenue data for [Company]:

• 2022: $X
• 2023: $Y
• 2024: $Z

Help me build a revenue projection for 2025-2027. Consider:

1. Historical growth rates
2. Industry context: [describe market conditions]
3. Company-specific factors: [any known initiatives or headwinds]

Provide three scenarios (conservative, base case, optimistic) with your reasoning for each assumption."

Expense Projections

"Given these operating expenses and the revenue projections we just discussed:

[Expense data]

Project operating expenses for 2025-2027. Consider which costs are likely fixed vs. variable, and any operating leverage the company might achieve at scale."

Building a Simple Financial Model

"Help me create a simple three-year financial model for [Company/Project]. I'll provide the assumptions, and I need you to:

1. Build out the projected income statement
2. Calculate key metrics (margins, growth rates, EPS)
3. Show your formulas so I can verify the math

Starting assumptions: [List your assumptions]"

Important caveat: Always verify ChatGPT's calculations manually. While it's generally accurate, complex multi-step calculations can sometimes contain errors.

Ratio Analysis with AI

Financial ratios are fundamental to analysis, and ChatGPT can both calculate them and explain their significance.

Comprehensive Ratio Analysis

Prompt template:

"Calculate and analyze these financial ratios for [Company] based on the following data:

[Financial data]

Please calculate:

Profitability Ratios:

• Gross margin
• Operating margin
• Net profit margin
• Return on equity (ROE)
• Return on assets (ROA)

Liquidity Ratios:

• Current ratio
• Quick ratio
• Cash ratio

Leverage Ratios:

• Debt-to-equity
• Interest coverage ratio
• Debt-to-EBITDA

Efficiency Ratios:

• Asset turnover
• Inventory turnover
• Receivables turnover
• Days sales outstanding

For each ratio, show your calculation, state whether the result is healthy for [industry type], and note any concerns."

DuPont Analysis

"Perform a DuPont analysis to decompose [Company's] return on equity:

[Provide net income, revenue, total assets, and shareholder equity]

Break down ROE into:

1. Profit margin (Net Income / Revenue)
2. Asset turnover (Revenue / Total Assets)
3. Financial leverage (Total Assets / Shareholder Equity)

Explain what each component tells us about how the company generates its returns."

Trend Analysis

"Here are [Company's] key ratios over the past five years:

[Ratio data by year]

Analyze the trends in these ratios. What story do they tell about the company's:

• Operational efficiency
• Financial risk profile
• Management effectiveness

Are there any concerning trends I should investigate further?"

Writing Financial Reports

ChatGPT excels at helping you communicate financial findings clearly.

Executive Summary

Prompt template:

"Based on our analysis of [Company], write an executive summary (300 words max) covering:

Key findings: [List your main findings]

The summary should be suitable for senior management who need the bottom line quickly. Use clear language, lead with the most important insight, and include specific numbers to support conclusions."

Investment Memo

"Help me draft an investment memo for [Company/Opportunity]. Structure it as:

1. Investment thesis (2-3 sentences)
2. Company overview
3. Financial highlights (use data from our analysis)
4. Key risks
5. Valuation considerations
6. Recommendation

Keep it to one page. Tone should be professional and balanced—acknowledge both positives and concerns."

Earnings Analysis Report

"Write a quarterly earnings analysis for [Company] based on:

[Earnings data and key metrics]

Compare results to:

• Prior quarter
• Same quarter last year
• Analyst expectations (if known)

Structure: Summary, Revenue Analysis, Profitability Analysis, Outlook, Key Takeaways"

Variance Analysis Report

"Create a variance analysis report explaining why actual results differed from budget:

Budget: [data] Actual: [data]

For each significant variance, identify:

1. The dollar/percentage difference
2. Whether it's favorable or unfavorable
3. Likely causes
4. Recommended actions"

Limitations and Verification

This is perhaps the most important section of this guide. ChatGPT is a powerful tool, but it has significant limitations for financial analysis.

What ChatGPT Cannot Do

1. Access real-time data — ChatGPT doesn't have access to current stock prices, live financial data, or recent earnings reports (unless you provide them)

2. Guarantee calculation accuracy — While usually correct, ChatGPT can make arithmetic errors, especially in complex multi-step calculations

3. Provide investment advice — ChatGPT is not a licensed financial advisor and its outputs should never be treated as investment recommendations

4. Verify data accuracy — ChatGPT will analyze whatever data you provide, even if that data contains errors

5. Account for market context — It may not understand current market conditions, regulatory changes, or industry-specific nuances unless you explain them

Essential Verification Steps

Always verify calculations manually. Before using any numbers from ChatGPT in a report or decision:

• Spot-check arithmetic with a calculator
• Verify ratio formulas are correct
• Cross-reference results with other sources

Double-check formulas. Ask ChatGPT to show its work:

"Show me the formula you used and the step-by-step calculation for [specific ratio/metric]."

Validate against authoritative sources. For public companies:

• Compare key metrics against SEC filings
• Check against Bloomberg, Yahoo Finance, or similar platforms
• Verify against the company's investor relations materials

Question unusual results. If something looks off, it probably is:

"This ROE of 45% seems unusually high. Can you verify this calculation and explain whether this is realistic for [industry]?"

Best Practices for Accuracy

1. Provide clean, accurate data — Garbage in, garbage out
2. Ask ChatGPT to explain its reasoning — This helps you catch logical errors
3. Use ChatGPT for drafts, not finals — Always review and edit outputs
4. Break complex analyses into steps — Reduces compound errors
5. Maintain professional skepticism — Trust but verify

Practical Prompt Templates

Here's a quick reference of prompts you can adapt for common tasks:

Quick Financial Health Check

"Based on these key metrics [data], give me a quick financial health assessment of [Company] in 3-4 bullet points."

Peer Comparison

"Compare [Company] to [Peer 1] and [Peer 2] on these metrics: [list metrics]. Who's performing best and why?"

Red Flag Detection

"Review these financial statements and identify any potential red flags or areas that warrant further investigation: [data]"

Explaining Financial Concepts

"Explain [financial concept] in simple terms I could use to brief a non-finance executive."

Scenario Analysis

"If [assumption changes], how would that impact [Company's] projected [metric]? Walk me through the sensitivity."

Take Your Skills Further

ChatGPT is a powerful assistant for financial analysis, but it works best when combined with solid foundational knowledge. Understanding financial concepts deeply allows you to ask better questions, spot errors in AI outputs, and apply insights appropriately.

Ready to build your financial analysis skills? Our AI for Finance & Accounting course teaches you how to effectively combine AI tools with traditional financial analysis methods. You'll learn when to trust AI outputs, how to verify results, and advanced techniques for financial modeling with AI assistance.

Want to become a ChatGPT power user beyond finance? Check out our ChatGPT Power User course to master prompting techniques that work across any domain.

For those building financial models, our Financial Modeling & Valuation course provides the foundational skills that make AI-assisted analysis more powerful.

Conclusion

ChatGPT can significantly accelerate your financial analysis work—from parsing statements and calculating ratios to drafting reports and exploring scenarios. However, it's a tool that amplifies your capabilities, not a replacement for financial expertise.

The key to success is treating ChatGPT as a knowledgeable assistant that requires supervision. Provide clear context, ask for explanations, verify calculations, and always apply your own judgment to the outputs.

Start with low-stakes analyses to build confidence in the tool. As you learn its strengths and limitations, you'll develop an intuition for when to trust its outputs and when to dig deeper.

Financial analysis is ultimately about making better decisions. ChatGPT can help you get there faster—but the decision-making judgment remains yours.