Technologies for Financial Analysis: R and R Studio

Last updated on April 4th, 2024 at 10:50 am

Financial analysis refers to an organisation’s process of analysing financial statements and arriving at effective decision-making. The data thus derived is not only used by the internal players of the company, but also external stakeholders so that they can understand the health of the organisation better, assess its business value and financial performance, and decide whether it is safe to invest in the company. 

However, the numbers won’t make any sense unless one deploys proper methods to analyse them thoroughly. As a result, financial analysis tools come in handy. In modern times, Big Data and Data Science have been highly beneficial to conduct financial analysis for industries as it helps businesses to understand trends, risks, and opportunities.

R and R Studio are two technologies that are used for financial analysis. In this article, we will discuss the importance of R and R Studio for financial analysis. 

Importance of Financial Analysis

Financial analysis helps organisations understand their financial position better. It gives an overall idea about an organisation’s creditworthiness, profitability, and so on. Accurate financial modelling and analysis help organisations have a better understanding of their internal operations. 

The importance of financial analysis is as listed below:

• Decisions related to shareholding and investment: A company has shareholders who invest in the form of repeated transfers and shares. However, every time before investing they need to assess a number of factors of the company such as reliability, profit, price, etc. 

Analysing the financial statement of an organisation helps the shareholders decide if they should continue investing in the company. Therefore, financial analysis helps in making crucial financial decisions.

• Internal planning within an organisation: Financial analysis helps companies make decisions, and plan and manage tasks of importance. Through proper financial analysis, companies can make smart investment plans. Being backed by robust data, there is barely any chance that these investments will go in vain and makes sure that the plans can reap maximum profits.
• Determining the creditworthiness of an organisation: Shareholders give loans to the companies as capital. Whether a shareholder should invest in an organisation depends on how the company has performed over time, and a thorough analysis of its financial statements. Financial modelling represents the operations of a company over a period of time.

Not only this but an interest rate is levied on capital loans. These decisions, too, are based on analysis of the financial statements of an organisation. 

What are R and RStudio and What are the Differences between Them 

R is a programming language that is used by statisticians and data miners. R helps in effective data analysis and developing statistical software. This language is excellent for graphics and statistical computing. It comes pre-installed in a computer system.

RStudio is an open-source software tool that is written in Java, C++, and JavaScript. This integrated development environment can be used for writing the R code and executing it. One can use RStudio for developing statistical programs. However, this does not come pre-installed; it has to be installed manually. 

Listed below are some of the differences between R and RStudio. 

You need to develop a detailed idea about these technologies if you want to establish a career in financial analysis.

Analysing Data Using R and RStudio

Data analysis begins with the attempt to find answers to queries or solutions to problems with the help of data. The R programming language has tools that help to conduct a proper analysis of the data that you wish to study. A course in financial analysis using R will teach how to form a connection between the data and real-world problems and conduct robust data analysis.

Once the problem has been identified and the data set that is to be used for analysis has been processed, the next step is to develop the model for analysis. However, it is also important to make sure that the model you develop will deliver optimum results and perform optimally in real-time conditions. The validity of the models can be assessed using the Tidymodels framework. 

RStudio helps to conduct a complete analysis of data with the help of R and other languages. RStudio comes with packages that can enhance the features of R. Analysis of financial data using RStudio goes through the following steps:

1. Importing the data in RStudio
2. Transforming the data
3. Basic statistics
4. Plotting the data distribution

RStudio is extremely easy to perform and the integrated development environment (IDE) works extremely well with the R programming language. Both these technologies can help in effective financial analysis and help businesses plan their course of action accordingly. 

Conclusion

If you are desirous to establish your career in financial analysis, this online Financial Analysis course offered by Imarticus Learning in collaboration with KPMG is an excellent option. This course can be considered equivalent to a 120-hour program that helps the learners develop their skills in various functions and also acquire relevant industry knowledge so that they can be prepared for the market and give their careers a boost.

If you opt for this 4-month-long course, you will get the opportunity to learn from experts who have years of experience in the industry. Not only this, but Imarticus Learning also extends placement support to the learners. Through career guidance, profile enhancement, and mock interviews, the course focuses on the holistic development of the candidates and prepares them in a way that they deem fit for various roles in the finance department.

You can visit the official website of Imarticus Learning to know more. Happy learning!