Analysing Financial Statements with AI

One of the most immediately useful AI applications in finance is feeding a P&L, balance sheet, or cash flow statement into an AI tool and asking targeted questions. What used to take an analyst an hour can take five minutes.

This lesson shows you exactly how to do it — what to paste, what to ask, and how to get analysis you can actually use.

What AI Can Do with Financial Statements

When you provide a financial statement to an AI, it can:

• Calculate and interpret key ratios (margins, liquidity, leverage)
• Identify trends across periods
• Compare performance against industry benchmarks (if you provide them)
• Flag anomalies or items that warrant further investigation
• Explain what the numbers mean in plain English
• Draft narrative commentary suitable for reports

It cannot pull your live data automatically (unless you've connected it to a system), so you'll be copy-pasting or uploading.

Step-by-Step: P&L Analysis

Step 1: Copy your P&L
Copy the data from Excel or your finance system. Table format works, but plain text with line items and numbers is fine.

Step 2: Paste with a structured prompt

"Here is a profit and loss statement for [Company Name] for [Period]:

[paste your P&L here]

Please:

1. Calculate gross margin, operating margin, and EBITDA margin as percentages
2. Identify the top 3 financial concerns from these numbers
3. Identify the top 2 positives
4. Write a 150-word executive summary suitable for a board report
5. Flag any line items that look unusual and might need explanation"

Step 3: Follow up with specific questions

After the initial analysis, drill in:

"The gross margin declined from 42% last year to 38% this year. What are the most common causes of this type of decline and what questions should I be asking the operations team?"

Balance Sheet Analysis

"Here is the balance sheet as at [date]:

[paste balance sheet]

Calculate:

• Current ratio
• Quick ratio
• Net debt (or net cash position)
• Debt-to-equity ratio

Then write 3 sentences interpreting the liquidity position for a non-finance board member."

Before/After: What AI Changes

Before AI: An analyst spends 45 minutes reading through a competitor's annual report, manually calculating ratios, then another 30 minutes writing commentary.

After AI: Analyst copies the relevant sections, pastes with a structured prompt, gets the ratios and a draft commentary in 3 minutes. Spends the remaining time on interpretation and validation — the genuinely skilled work.

Comparing Against Competitors

"Here are the key financial metrics for three companies in the same sector:

Company A: Revenue £120m, Gross Margin 38%, EBITDA £14m Company B: Revenue £95m, Gross Margin 44%, EBITDA £18m Company C: Revenue £140m, Gross Margin 31%, EBITDA £10m

Which company has the strongest financial performance? Provide a ranked analysis with reasoning. What questions would a potential acquirer ask about Company C's low margins?"

Important Caveats

• Always verify ratios AI calculates against your own numbers — AI can make arithmetic errors
• Provide the AI with accounting context if your P&L uses non-standard line items
• Don't paste confidential client data into public AI tools — use anonymised or dummy figures where needed (see Module 5)

Your Turn

Take last month's management accounts (or a public company's results you can find online). Paste the P&L into Claude or ChatGPT with the analysis prompt above. Compare what it produces to your own reading of the numbers. Where does it agree? Where does it miss something?