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Tag: financial analyst

What Are Qualities of Good Financial Analyst?

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Albert Einstein once stated, “It is not that I am so smart, it is just that I stay with the problems more.”

Having concentrated explicitly in their professional experiences, educational history, and challenging abilities, an ideal financial analyst is one who marries proprietary technologies with unwavering dedication to get the job done and deliver maximum results. Suffice to say, there is more that goes into an excellent finance candidate compared to just one’s specialist makeup.

No provider is exactly alike, thus becoming a candidate that satisfies every company’s one-of-a-kind business culture is essential to mutually beneficial employment. If you possess those requirements and are the ideal fit for a organization’s culture, you are more inclined to slip easily through the hiring procedure. Showcasing employer-coveted character traits of the fund sector is exactly what you need to land that perfect job position. So what are these traits?

Must-have Skills for a Financial analyst:

  • Employers rely on workers who will pull in hard times. A leading finance candidate chooses action to discover solutions — irrespective of the circumstance or fault. This attribute may not be an easy-read through the hiring process.
  •  A number of the most influential leaders easily embrace and use their analytic abilities to make waves within their own companies. The capability to demonstrate logical thinking so as to assemble and analyze many different advice is an absolute requirement in the finance area. – Since analytical abilities are not very inborn, being well-versed in analytic experiences ensures a good base.
  • The most enviable finance professionals are individuals who push themselves and others ahead through enthusiastic motivation.
  • Effective communication skills – this helps to boost productivity and efficiency when working with customers, people, along with a staff.
  • Your leadership abilities are certain to turn heads. Employers want candidates that have the ability to communicate with supervisors, coworkers and customers. You ought to have the ability to easily throw your communicating efforts to the preferred stations, platforms, and fashions of everyone you encounter.

Confidence provides a basis for stride in just about any element of finance. You should have confidence in your ability to move your business ahead but additionally, exploit a willingness to set your business and team before yourself. Would you invoke confidence and devotion in somebody who you’ve just met? Could you drive things home in a demonstration? These characteristics are sure to have you hired.

To sum it up, for a fantastic financial analyst, one requires budgeting, forecasting and planning experience. They can craft the easiest hypothesis and examine it. They have a powerful database and spreadsheet skills. Their budgeting, forecasting, and planning abilities are based on a solid comprehension of their business markets, products, and processes. They have exceptional small business partnering skills that empower them to convey complex data in an accessible way. Finally, they possess all the necessary soft skills such as confidence, effective communication, and problem-solving abilities, that will take not only themselves but their team and company towards success.

Difference between a Business Analyst and Financial Analyst

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Today’s data-driven world calls for professionals who can gather analyse and study data to obtain valuable insights and help businesses to grow in new trajectories. Data science is growing to become one of the most rewarding career opportunities in the contemporary landscape. The need for data analysis is on an unprecedented scale.

Companies are leveraging progressive technologies to decode data and make sense of their business decisions. Naturally, this need to utilise data has increased the demand for data science-related professionals who can churn complex data and make sense of the big numbers.
The data science industry is very dynamic and it requires a diverse range of skill sets. People entering into data science-related fields have multiple options. These choices can sometimes be overwhelming for an individual; one such choice is between the role of a financial analyst and business analyst.

People are often confused between the two. Although there are multiple aspects of these roles that are very similar, there are considerable differences between the role of a financial analyst and business analyst. Let’s get some contextual insights into the differences between the two job roles.

Educational Requirements

Let’s start the comparison by finding out the level of education needed to enter into both the job roles. The academic requirements for both roles vary greatly depending on the organisation. However, a bachelor’s degree in a relevant field remains a prerequisite for the job of an analyst. You can opt for a financial analyst course or business analyst course to supplement your education and get a relevant job.
The role of business analysts has a wider scope as it is related to the overall analysis of the business. The role of a financial analyst is very specific and is more inclined to the financial aspects of the business. Business analysts can choose from various majors like Finance, management, accounting, technology, etc. For financial analysts, preferable majors include finance, economics, and statistics.

Skillsets

One common skill set needed for any analyst position irrelevant of the specialisation is the ability to identify trends and patterns and find irregularities in data. In addition to this, financial analysts need to have good quantitative acumen. Technology has made it easier to solve complex mathematical problems but has a good quantitative acumen is a strong fundamental trait that financial analysts should have. The robust knowledge base in fields like probability, statistics, trends, etc. is a must-have. It also requires good presentation skills to depict the inferences derived from complex financial analysis.
Business analysts also need to have good quantitative acumen but the emphasis is laid on identifying errors and problems in the businesses’ operations. Business analysts need to have strong problem-solving skills and they should be able to leverage technology to solve business problems. They are more like the connecting link between the technical and non-technical aspects of the business. Strong logical reasoning and management skills are a must-have for a business analyst’s role.

Remuneration

Analysts, in general, earn more than average income, even at the entry-level positions. The compensation is less when compared with an investment banker’s income but it provides a better work-life balance which hardly is the case with investment bankers.
As per research reports, the entry-level salary of a financial analyst ranges from $53000 to $66000 in a large US-based firm. In addition to this they also receive fairly decent bonuses and commissions at times it is equivalent to their annual pay.
The average salary for a Business analyst professional ranges from $55000 to $70000 in a large US-based firm. They are also entitled to decent bonuses and commissions. The income potential is almost identical in both the roles.

Also Read: Difference Between Business Analyst & System Analyst

How Can I Become a Financial Analyst Online?

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The Role of a Financial Analyst

A financial analyst is one of the most lucrative career options for people pursuing a career in the field of finance. Financial analyst plays a key role in the day to day functioning of financial firms.

The role of a financial analyst in the age of data is very diverse and involves complex financial planning and analysis for companies. They help firms to make well-informed decisions by using their financial acumen. People working as financial analysts are required to produce reports using financial data.

Financial analysts also help to project future revenue and expenses that help to determine the budget for new projects that the firm is planning to undertake. The job description of financial analysts typically entails analyzing historical and current stats, identifying trends, assessing financial performance, preparing financial reports and communicating with important stakeholders, exploring new profitable investment avenues, developing financial models, building policies that will help to achieve financial growth, etc.

What Does it Take?

Now that we know the roles and responsibilities of financial analysts, let’s understand what it takes to become a financial analyst. Having a Bachelor’s degree in economics, mathematics, stats, and accountancy is a good way to step into the finance industry for the role of an analyst.  The ability to identify trends and data patterns is a crucial skill that one needs to become successful as a financial analyst. A Bachelor’s degree also forms the part of minimum education requirement needed for the role of a financial analyst.

A Bachelor’s degree is sufficient for most of the positions but some roles might require the candidates to have a Master’s degree in a relevant field, for example, Masters in Business Administration in Finance. One can even opt for highly specialised certification like the Chartered Financial Analyst program; it provides a holistic learning experience by focusing on core financial subjects like equity, portfolio management, corporate finance, alternative investments, ethics, etc.

Some of the key skills needed to become a successful financial analyst include analytical skills, quantitative acumen, detail-oriented, basic knowledge of financial software, interpersonal and communication skills.

Becoming a Financial Analyst Online

We are living in an era where internet technology has made it possible to avail the benefits of the real world virtually using our smart devices. Technology-based industries like Ed-tech and Fin-tech industries are booming constantly. Data has revolutionized the world around us and the finance industry is no exception. This evolution within the finance industry has led to increasing demand for financial analysts who can make sense of the complex financial data and help the firm with future growth and revenue projections.

The growth in the Ed-tech industry has made it possible for aspirants to learn and become financial analysts online. You can choose from a range of online financial analysis courses and certifications that provides a comprehensive understanding of the subject and imparts relevant practical knowledge and skills required to do the job.

We at Imarticus Learning offer best financial analysis course online that will help you achieve your dream of becoming a financial analyst. Our placement assistance team will provide you with the ideal platform to launch your career through resume building sessions, mock interviews, mentorship and interview preparation. Our team will also work towards finding you interview opportunities, as well as thoroughly prepare you prior to every interview.

Also Read: Future of Financial Analyst in India

Why Is Financial Analysis Important?

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Financial analysis refers to the detailed process of evaluating a business, reports, budgets, ideas etc. to assess the feasibility of investing in the same, buying it, making informed decisions that align with organisational goals etc. It usually evaluates the same on four parameters, namely- liquidity, profitability, solvency, and stability. Thus, as important as it is to account for financial analysis, it is also important to interpret it and understand the relationship between different business components for enhanced financial analysis. A financial analysis course extends the knowledge to perform an in-depth analysis using various techniques such as vertical analysis, horizontal analysis, ratio analysis, trend analysis, interpreting cash flow statements and balance sheets, etc. In today’s date, this practice has become all the more important as financial literacy, research and management are on the rise. To save money in a progressive trend, investment in assets, purchasing value investments, wealth creation, expansion of business, profitability with sustainability etc. a company needs to perform a financial analysis before making any decisions in this VUCA environment. Listed below are other reasons as to why taking a financial analysis course is paramount for the short term and long term interest of the firm:

● To assess the risk involved: No investment is rewarded without risk. No decision comes without impending peril. During a financial analysis, one can calculate the reward one reaps in proportion to the risk undertaken. It also helps companies in assessing their risk-taking capacity, calculate opportunity costs, and make choices accordingly.
● Comparative Analysis: Understanding and interpreting financial statements charts an easy path to compare between more than one avenues for investment, budgeting, forecasting and so on
● Health check of the financial performance of the firm: A microscopic view of the financial statements, annual reports, share prices, and market share of a firm can reveal it’s stability to pay dividends to shareholders, profit retention, resource optimisation etc. that helps in making an informed decision
● Productive Efficiency: An in-depth look into the financial statements and reports of an organisation puts them in a better place to control any discrepancies in the operational and managerial capacity of the firm and take feedbacks or measures to ensure the removal of the same
● Relationship with stakeholders: While the financial communique of companies provides an idea to the employees in terms of their pay, monetary and non-monetary benefits; it gives knowledge to the existing and potential shareholders of dividends paid. Similarly, it informs the suppliers about the credit-worthiness of the firm and to the investors an understanding of the company’s revenue-generating capacity and profit maximisation. Thus these statements provide an insight into the workings of the organisation to different stakeholders which determine a long-lasting relationship with various groups of stakeholders.
● Trend Spotting: By always staying informed about the inter-alia of a company through documentation of all its business decision via its annual reports, one is vigilant of the changes, trends, decision-making approaches of the company that helps in better financial planning and lucrative returns
● Macroeconomic and Microeconomic perspectives: The course of financial examinations of companies is such that it gives an extensive idea of not only what is happening within the company, but also a broad view of the competitors, the industry, and thus the economy. It amplifies the understanding of how everything is connected in the ecosystem due to which financial analysts and planners can vet decisions in terms of stable organisational finances and wealth management.
● Financial Planning: Due to the financial analysis course, companies are in a better place to decide, plan, and organise their wealth management portfolio, which aligns with short-term and long-term financial goals. It is a calculated prediction that brings stability, additional sources of revenue, and increased assets, and improved wealth creations.

Proper financial analysis, management, and planning benefits any organisation irrespective of their nature and size. It empowers them to make better management decisions, increase profitability, and achieve organisational goals in due course of time.

The Growth of CFA Courses and 2020-2027’s Outlook

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The Chartered Financial Analyst tag is obtained only after months of blood, sweat and tears going into preparations. Yet the CFA designation remains one of the most coveted job roles in the world and, in recent times has seen astonishing growth in hopeful candidates.

What is CFA?

The CFA has come to be one of the most influential and recognisable investment insignia worldwide. The designation is bestowed upon successful candidates by the CFA Institute which was formerly known as the Association for Investment Management and Research (AIMR). This institution is responsible for the examination and certification of financial analysts; their exams are frequented by thousands every year.

The CFA exam has three levels, the successful completion of which will establish candidates as masters in the investment and management fields.

Why Are CFA Courses Increasing?

  • The increased flow of money: The CFA designation is still heavily sought after, despite the rigorous run-up to the examinations. For starters, this is because the demand for highly qualified finance professionals is increasing with the proliferation of globalisation and the increased flow of money.
  • Great job prospects: CFAs are usually in demand for top decision-making positions where each ‘yes’ or ‘no’ has significant bearings on the functioning of the company. Naturally, then, passing the CFA exams and earning yourself the tag will guarantee excellent job prospects at top tier firms in several investment areas. From investment firms to hedge funds, investment-related entities know and value the knowledge base acquired by CFAs in the duration of their course. Thus, their resumes place top, over all other candidates in related fields.
  • Knowledge of regulatory standards: CFAs are also valued for their high professional and ethical standards. Companies benefit from hiring financial analysts who know the laws of the game like the back of their hand– this prevents any auditing and regulatory hiccups in the future which tend to spell massive losses at any scale.
  • Experience and practise: The charter is conferred after four years in the industry– rigorous years of practice and experience that are of immeasurable value to companies locked in aggressive competition. The ideal CFA course allows candidates to engage in real-world scenarios to sharpen their problem-solving and analytical abilities.
  • Abundant networking opportunities: Numerous worldwide CFA societies allow graduates to build unbeatable connections. These global networks are beneficial in that fresh graduates can find job opportunities while veteran CFAs can find willing partners to either employ or collaborate with over a venture.
  • More focused than MBAs: While 2-year MBA programmes offer students a wide and comprehensive perspective of the investment field, no course goes as in-depth into financial analysis as an international CFA course does. It is also a more affordable option for those looking to jump into the industry but unwilling to pay ceiling-high tuition fees for MBA courses.

What Does 2020-2027 Look Like?

As of 2019, over 167,000 investment analysts and professionals hold the official CFA charter. In the coming few years, the number is likely to increase, especially since India is moving to the forefront. International financial entities are setting their eyes on India to outsource a massive amount of work and set up remote offices and branches. As they will be looking to recruit the highest credentials in the investment world, obtaining a CFA charter all the more important for Indian investment professionals.

The growth of wealth management will also aid the expansion of CFA charter-holders across the globe, India included. The industry has been growing at a year-on-year figure of 20%.

As time goes by, more and more exciting opportunities will crop up for investment professionals to make their mark. The CFA course aims to create a pool of professionals that are steeped in ethics and knowledge, ready to lead the industry in the coming years.

What Are the Types of Financial Analysis?

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What is Financial Analysis?

Financial Analysis can be understood as the process of complex business evaluation to assess and find out about the viability and profitability of an enterprise. Financial analysis can also be applied to a specific project or business segment to determine if it’ll be a profitable opportunity to pursue based on various financial parameters. A business can also be judged on its liquidity and solvency aspects using various financial analysis techniques by the analysts.
Financial analysis is often used by businesses to build financial policies for the firm, predict economic trends, identify profitable investment avenues, frame long-term business plans based on calculated trends. One of the mainstream ways to do financial analysis is using u ratios that are calculated using the financial statements and are compared with the historical ratios of the firm to evaluate the performance.

Different Types Of Financial Analysis

In the traditional sense, financial analysis can be categorised under two categories – Fundamental financial analysis and Technical financial analysis. If we go deeper into the categories it has multiple dimensions, for an example, (based on modus operandi) it can be categorised under Horizontal analysis and Vertical analysis. Based on entities involved it can be categorised as Inter-firm analysis and Intra-firm analysis, based on time horizon we can classify it under Short-term analysis and Long-term analysis. There are other such bases on which we can divide and categorise the types of financial analysis. Let’s delve deeper into the broader category that includes Fundamental analysis and Technical analysis.

Fundamental Analysis

The concept of fundamental analysis is built on the grounds of finding the intrinsic value of the business or the stocks. It is carried out to find whether the stocks that are trading currently in the market reflect the true value of the business or not. At the end of the fundamental analysis, analysts rate the stocks as undervalued or overvalued. It is rated as undervalued when the intrinsic value is more than the price of the stock in the market, meaning that it’ll be beneficial to buy it. Overvalued means the exact opposite, it means that the stocks are overly priced in the market and the actual value is lower.
Fundamental analysis is carried out by calculating various ratios for the business from the data obtained using the financial statements. Ratio analysis takes a holistic approach and calculates metrics like earning per share, debt to equity ratio, liquidity ratio, etc. In addition to this, the process of fundamental analysis also includes doing a thorough financial and economic review of the organisation to arrive at a meaningful conclusion that factors in all aspects of financial viability.

Technical Analysis

Technical analysis is a method of financial analysis that is used to evaluate the Securities being traded. This approach has a different take to analyze the financial viability of the firm. It relies on statistics generated from the market to do the analysis, like using the charts and patterns of trading to conclude the performance. The technical analysis is about making predictions about the movement of the market prices of the security by taking the historical price movements into account. The market price is the sole determinant here instead of the internal performance data of the firm. It does not evaluate the intrinsic value of the firm. The major assumption here is that the price trends are likely to repeat themselves. The major emphasis here is to find out the right time to buy or sell a security based on past and current price movements.

Conclusion

Broadly speaking, there are two types of financial analysis techniques – Technical analysis and Fundamental analysis. One is focused on finding the intrinsic value and the second is focused on predicting future trends.

What is the Difference Between Financial Mathematics, Financial Analysis and Financial Economics?

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The terms financial mathematics and financial economics are often interchanged and thought of as the same discipline. Financial analysis is a different discipline all-together that uses elements from financial mathematics and financial economics in doing an in-depth analysis of the targeted firm regarding its financial sustainability.

Let’s compare and see how they differ.

What is Financial Mathematics?

Financial mathematics can be understood as the field that is concerned with mathematical applications in finance. Solving financial problems using mathematical methods is the main focus of financial mathematics. Financial mathematics is alternatively termed as quantitative finance and computational finance.

The major applications of quantitative mathematics are in the field of securities valuation, risk management, and portfolio structuring, etc. by financial institutions like investment banks, hedge funds, and insurance companies. Financial mathematics also plays a crucial role in commodities-based industries.

The valuation of various financial instruments requires mathematical modelling of financial markets.

What is Financial Analysis?

Financial analysis can be defined as the process of evaluating a business or a project using different techniques such as ratio analysis that helps to ascertain the suitability and viability of the business. Major applications of financial analysis are in evaluating economic trends, building financial policy, etc.

The results obtained after a rigorous financial analysis help different stakeholders in decision making. Internally conducted financial analysis helps managers to make an informed decision or study successful historical trends. Financial analysis is further classified into two parts -fundamental analysis and technical analysis, let’s delve into the details of both the techniques.

Fundamental Analysis

Fundamental analysis uses the approach of evaluating securities and conducting financial analysis by measuring the intrinsic value of the security. Fundamental analysis takes a more comprehensive view of the organisation and considers different factors such as economic conditions, industry outlook, management of the company, etc. It also evaluates the company on account of assets, liabilities, expenses, income generated, etc.

Technical Analysis

Technical analysis is different from the fundamental analysis technique for evaluating the viability of the company. It has only two inputs in the whole evaluation method. The two elements of this technique are stock prices and volume. It assumes that stock prices reflect other important fundamentals of the company. This method uses stock charts and other tools to predict the future trends of the stock.

What is Financial Economics?

Financial economics is a discipline in economics that is concerned with the analysis of the use and distribution of resources in the market. It studies how different factors such as opportunity cost, risk, time, etc. play a crucial role in creating incentives or disincentives for any specific decision.

It involves employing complex financial models to test the variables influencing a particular decision. Rational consumer behaviour is an important and common assumption with these models. Microeconomics, econometrics and basic accounting concepts form the pillar of this discipline of economics. Financial economics requires a basic understanding of the concept of probability and statistics.

Comparing the three

Now that we have individually learned about all three disciplines the difference is very evident. Let’s compare how they differ from each other, starting with the comparison between financial mathematics and financial analysis.

Financial mathematics is a field of applied mathematics that is concerned with the financial markets whereas financial analysis is the assessment of different elements that paints a picture of the functioning of the business which will help different stakeholders in informed decision making.

Financial economics is heavily concentrated on two aspects of finance, asset pricing and corporate finance. The role of a financial economist requires collecting and analysing statistical data using different sampling and econometric techniques.

What is the Future of Financial Analysts in India

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The role of a financial analyst is one of the most sought-after positions in the financial services industry. This is due to the fact that analysts have a scope to work in a range of industries together with high earning potential. An analyst plays a critical role in any business that he or she is representing on behalf of their firm.

In general, financial analysts work for KPOs, banks, investment firms, investment banks, insurance companies and even individual companies. A good analyst should be able to evaluate the company’s overall position in the industry in terms of its strengths, performance, prospects compared to its competitors. This involves an in-depth understanding of the company’s investments, finances, growth plans, etc.

Educational Qualification Required

To fit into the role of a financial analyst should have at least a bachelor’s degree, preferably with any of the finance subjects like accounting, economics or statistics as the major. In case the analysts want to equip themselves for better job opportunities and salaries they might consider pursuing a master’s degree in finance or a Master’s of Business Administration (MBA). Any kind of advanced education increases the value of these professionals in the eyes of their potential employers.

In some cases, it has been noticed that employers prefer hiring only those financial analysts who have done their certifications from the Chartered Financial Analyst Institute. They can also enrol into several programs designed to prepare these financial analysts for the challenges they might face in the workplace.

Skills Required for the Role

Some of the specific skills required for this position are:
• Excellent analytical skills
• Good mental judgement
• Sound knowledge
• A good team player

Role and Responsibilities of Financial Analyst

A financial analyst’s role usually differs depending on company to company. These analysts usually focus on a specific region, sector or type of product.

• They determine the cost of operations by gathering the operational data
• Comes up with a financial status by comparing and analysing the actual results with the forecasts
• Guides the process of cost analysis by creating and enforcing policies and procedures, explaining the process and techniques and recommending actions to the management
• Improves the financial status by identifying trends, monitoring variances and reconciling the transactions by correcting the data
• Increases the company’s productivity by developing automated accounting applications
• Maintains the company’s database
• Attends educational workshops to upgrade themselves
• Protects the operations by keeping financial information confidential

The Future of Financial Analysts in India

Today, the role of a financial analyst is considered one of the premier careers even in India. Reports says, there are over 7,000 financial analysts’ jobs available only in India. Once they attain the desired qualification they have the scope to work with financial institutions, multinational banks, Reserve Bank of India, Industrial & Development Bank of India, Unit Trust of India, finance and leasing companies, stockbroking firms, insurance companies, public sector organizations e.g. Railways, corporate sector and consultancies.

The Average Salary of a Financial Analyst in India
In India, at the entry-level financial analysts having less than a year’s experience can expect to earn an average salary of ₹313,149 per annum. With 5 to 9 years of experience, the compensation can go up to ₹574,432 per annum. With 10 to19 years of experience, one can expect around ₹981,857 per annum.

In the later part of the career, with 20 years of experience and more, employees can earn an average compensation of ₹1,502,000 per annum. For more details, one can check the website www.payscale.com.

Conclusion
A career as a financial analyst not only offers financial security but also gives an exciting opportunity to be a part of the country’s finance industry. Considering the rising scope of this career in India, one can obtain the essential education required and gear up for a lucrative job opportunity

Also Read: What is Financial Analyst Course

What is Financial Analysis

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Financial analysis is the use of financial data and information to evaluate the performance of a company and come up with strategies and recommendations as to how to improve its operations.

Financial analysts are people who study and help analyse the historical data of a company and make predictions about its future performances.

Types of Financial Analysis

There are various kinds of financial analysis, which are:

  • Vertical Analysis
    This is a form of analysis where different components of an income statement are taken into consideration and then segregated on the basis of revenue to express them as a percentage. Results obtained are often compared with that of other companies in a similar industry to get a better overview of the company performance.
  • Horizontal Analysis
    This form of financial analysis involves the study of extensive financial data gathered over a couple of years which are then compared with each other to determine their rate of growth over time. This helps in understanding whether a certain organisation is growing or falling.
  • Leverage Analysis
    Highly popular among financial analysts, leverage ratios are used in the evaluation of an organisation’s performance. While complete debt is considered as a single financial metric and may not be completely helpful on its own, it can be evaluated against the total equity of a company to understand its complete capital structure.
  • Growth Rates
    Another big aspect of financial analysis is understanding growth rates and making predictions or projections regarding the same. Here are a couple of examples of how growth rate analysis is conducted:

    ● Regression analysis
    ● Year on year
    ● Bottom-up analysis
    ● Top-down analysis

  • Profitability Analysis
    This is a variation of an income statement analysis to understand if the economics of any business is in place or not. Here is how profitability analysis is conducted:

    ● Net profit margin
    ● Gross margin
    ● EBIT margin
    ● EBITDA margin

  • Liquidity Analysis
    This kind of financial analysis depends on the balance sheet of an organisation, mostly to understand if the short term obligations of a company have been met or not. Common methods of liquidity analysis are:

    ● Acid test
    ● Cash ratio
    ● Current ratio
    ● Net working capital

  • Efficiency Analysis
    Efficiency ratios are analysed to understand if an organisation can manage its assets well and effectively use them in cash flow and revenue generation. Most efficiency ratios are:

    ● Cash conversion ratio
    ● Inventory turnover ratio
    ● Asset turnover ratio
    ● Fixed asset turnover ratio

  • Cash Flow Analysis
    Any organisation’s ability to generate cash flow is one of the most crucial factors in the field of finance. Analysts usually start from the cash flow statement to understand the operating procedure of any company including their investing histories and finance activities. Common cash flow analysis methods are:

    ● Free cash flow
    ● Operating cash flow
    ● Free cash flow to the equity
    ● Free cash flow to the firm

  • Return Rates
    Analysing return on investment (ROI) is very crucial in the finance sector since investors are always concerned about the rate of return they can earn on the money they have invested. Common rates of return analysis include:

    ● Return on assets
    ● Return on equity
    ● Return on invested capital
    ● Capital gain
    ● Dividend yield
    ● Internal rate of return
    ● Accounting rate of return

  • Valuation Analysis
    The valuation of a business is an important part of financial analysis; financial analysts often spend time building financial models to understand this. There are quite a few approaches for valuation analysis, which can be:
    ● Market approach of relative value
    ❖ Precedent transactions
    ❖ Comparable company analysis
    ● Cost approach
    ❖ The cost of building or replacing
    ● Intrinsic value
    ❖ Discounted cash flow analysis
  • Sensitivity and Scenario Analysis
    Risk measurement of any business is conducted by the method of sensitivity and scenario analysis during financial modeling. This procedure is to value and predict the future of a company. Performing a sensitivity test could help understand if the future of a company might be at stake, which is why financial planning and analysis is essential. This also helps an organisation prepare budgets and make future predictions.
  • Variance Analysis
    A form of financial analysis, it is the method of comparing the budget or a forecast to the actual projections or results. Variance analysis is important for the finance and accounts departments of a company since it helps in budgeting, internal planning, and operations.

How is the Life of a Financial Analyst

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The evolution of the finance industry has been on an unprecedented scale and every new phase has brought new financial innovations in terms of new ways of providing services to the customer and more advanced customized financial tools for investment. New jobs are created as a by-product of advancement in the industry. In the contemporary era where everything is run on data, the role of a financial analyst is very significant for the financial institution and the industry in general. Let’s see how they add value to this dynamic industry.

What do Financial Analysts do?

The role of a financial analyst is very dynamic, to say the least; it incorporates a range of tasks to be carried out by the personnel functioning in the capacity of the analyst for the firm. From collecting data to analyzing reports and making forecasts and projections they have to add value in multiple segments. Let’s dive a little deeper into some of the key roles and responsibilities handled by the financial analyst on a daily basis.

Collection & Organization of Valuable Information

It all starts with data and the more the merrier, the primary role of the financial analyst is to gather valuable and relevant data to work on and make an analysis. Most of the data collected to do the analysis are quantitative in nature. The data is collected from various sources such as the company’s database, Security and Exchange Commission (SEC), third party data providers like S&P Global, Bloomberg etc. Stock prices, historical financial and accounting data, industry-related research information, etc. are some of the examples of data collected by the financial analysts to do analysis and make predictions.

The next step after collecting relevant data is to organize it into a proper database, generally done in excel. The data that is collected is not filtered and has a lot of irrelevant added information that is unnecessary to the analysis, the data gathered is categorized, functions and formulas are applied to the database to make it more dynamic and formatting is used to make it easily interpretable.

 Analysis and Projection

When the data is organized and filtered, the financial analysts start with the analysis of past results. In order to perform such analysis they have to factor in metrics like profit margin, fixed costs, variable costs, Earning per share (EPS), debt to equity ratio, asset turnover ratio, an asset to liability ratio, return on equity, etc. The analysts have to look for patterns and trends and then have to compare the performance of the company with the industry standards and with competitors in the field. This is one of the key tasks that is carried out by financial analysts.

Coming to making forecasts and projections, after analysing complex historical records of the company the analyst has to use their financial crystal balls and make projections about the company’s future growth and performance. There are certain assumptions in place while predicting the performance of the company. Some of the mainstream forecasting methods include regression analysis, year on year growth rates, etc.

Make Recommendations

The role of the financial analyst also includes gaining valuable insights about the industry and the business and make recommendations as to how can the operations and functioning be improved in order to stay competitive in the market. Some examples of valuable recommendation by financial analysts include new areas to generate revenue, optimizing the price point, how to minimize the total costs, suggesting the proportion of fixed and variable costs to be used, methods to increase the market share and capture more customers for the business. These suggestions are presented to higher officials of the company including CEOs & Board of Directors.

Other days to day responsibilities of a financial analyst include making presentations, generating reports, etc. Building excel models with the help of financial modeling techniques are also a big part of the job when working with investment banks, equity research houses and corporate finance.

Conclusion

All in all the role of a financial analyst has multiple dimensions to it and requires you to excel on multiple fronts. The day to day activities includes data collection and organization, analysis & projection and making valuable recommendations to the firm. Making presentations and building excel models also comes as a part of the parcel.