Financial Data Extraction and Classification: A Strong Foundation

Before forecasting can take place, financial statements must be accurately extracted, classified, and structured. Socratics.ai’s proprietary classification engine ingests income statements, balance sheets, and cash flow statements, automatically categorizing line items using AI, machine learning, and rule-based logic.

With our system, investment banking, private equity, and private credit professionals no longer need to manually map financial statements, ensuring accuracy, consistency, and comparability across financial models.

Calculation & Forecast Capabilities

Once financial statements are ingested and classified, Socratics.ai automates the following calculations and projections:

1. Category Roll-Ups

Socratics.ai's category roll-up feature aggregates individual line items from income statements, balance sheets, and cash flow statements into standardized financial categories such as revenue, cost of goods sold, operating expenses, and more. This process ensures consistency in financial reporting across various companies and industries, enabling users to compare and analyze data effectively.

2. Derived Metrics

We derive metrics feature calculates key standard financial indicators, including Gross Profit Margin, EBITDA, EBITDA margin, Days Sales Outstanding (DSO), and Days Payables Outstanding (DPO), among others. This comprehensive set of calculations provides users with a detailed understanding of their company's financial performance, enabling them to make informed decisions.

Additionally, the platform automatically structures a complete cash flow statement based on income statement and balance sheet inputs, providing a streamlined and accurate representation of a company's liquidity position.

3. Validation & Consistency Checks

This set of features ensures the accuracy and integrity of financial data by cross-checking values between financial statements and identifying potential issues such as missing data, incorrect balances, and inconsistencies in reported numbers. This thorough review process provides transparency and auditability, enabling users to identify areas for improvement and make informed decisions with confidence. The platform also offers user-friendly alerts and explanations, providing clear guidance on how to address any discrepancies or errors identified during the validation process.

4. Forecasting Based on Historical Growth and % Assumptions

Configurable forecasting capabilities enable users to project future performance based on historical data trends, allowing them to apply growth rate assumptions to revenue, expenses, and other key financial metrics. This results in the generation of forward-looking financial statements that seamlessly integrate into existing financial models.

The platform offers five flexible forecasting methods:

1. Historical CAGR-Based Forecasting – Uses the compound annual growth rate of historical data.

2. % of Linked Line Item – Links growth to % of revenue or other selected line item. 

3. Percentage Growth Forecasting – Applies a user-defined percentage growth to each period.

4. Dollar Growth Forecasting – Adds a fixed dollar amount to each period.

5. Customized Forecasting – Enables users to set unique assumptions per line item and period.

These forecasting methods can be applied across all periods or for specific discrete periods, providing flexibility in financial modeling.

How Socratics.ai Transforms Financial Modeling

By automating data extraction, classification, and user based calculating forecasting, Socratics.ai eliminates the inefficiencies of manual data entry, empowering financial professionals to:

• Spend more time on valuation, strategic decision-making, and deal analysis.

• Improve the accuracy of financial models with standardized, error-free data.

• Accelerate financial analysis by reducing time spent on manual reconciliation.

Conclusion

Socratics.ai is revolutionizing financial modeling by automating the tedious and error-prone aspects of financial data preparation. Our AI-driven platform provides investment banking, private equity, and private credit professionals with clean, structured, and accurate financial statements, allowing them to focus on high-value analysis and decision-making.

If you’re interested in seeing how Socratics.ai can enhance your financial modeling process, contact us for a live demo today!

About SocraticsAI

SocraticsAI is a US-based technology company focused on leveraging AI to accelerate execution workflows for investment banking and private equity deal teams. Its employees bring decades of combined experience in financial services, fintech, public accounting, and AI technology. To learn more, follow us on LinkedIn or visit socratics.ai.