A career path that favours those with strong logic and a mathematical brain, who love to use data to tell a story.
What Financial Analysts Do
Financial Analysts use data to assess the prospects, profitability, viability and stability of a business or project. They then make recommendations based on their findings which is used in investment decisions.
Not to be confused with Financial Analytics Professionals, Financial analysts mostly scrutinize financial data and their findings are used to help companies make business decisions. Most often their analysis deals with investing.
A financial analyst will research macroeconomic and microeconomic conditions as well as the fundamentals (balance sheet, cash flow, income statement) of a business, then make predictions about the future of the businesses or sectors or industries.
Most financial analysts work on the buy side. That is, they help their employers make decisions on how to spend their own money. On the sell-side, analysts will evaluate & compare the quality of securities in an industry or sector. Then, based on this analysis, they then write research reports with certain recommendations, such as “buy,” “sell”, or “hold”.
Entry-Level analysts usually are tasked with ‘bottom up’ analysis where they consolidate financial data for further analysis. They will pore over an individual company balance sheet, income statement and cash flow statement to get a good idea of how the business is performing. They will do this for several businesses in a sector, so they can benchmark the performance of a company relative to another.
This data is subsequently used by more senior personnel to make investment decisions. The bottom up analysis involves looking at the specific company, then the industry, then the whole economy. Entry level analysts may have to prepare financial reports, develop forecasting models and analyse financial performance
Investment analysts provide clients, be they fund managers, market traders or financial institutions with financial information, advice and recommendations so they may make investment decisions. They gain this information by researching companies, particularly in terms of their financial functioning. Investment analysts must interpret complicated financial information and provide thorough financial research summaries.
Investment Analysts perform the ground work in assessing companies and making recommendations. They distinguish themselves from entry-level analysts by being experts in certain sectors or markets. By following a certain market or sector closely, they can provide insight into the performance of that area that outsiders cannot.
Financial analysts are in house staff that analyse cash flows and expenditures of the company, maintain budgets and provide general financial insight for a specific business. These analysts don’t deal with the broader market but keep their focus internal to benefit the decision making of the company they work for. One must still have a clear idea of how the sector or industry they work in is tracking so as to maintain an idea of what the business that employs you requires.
These types of analysts jobs are usually on the pathway to CFO, CEO type roles if one stays with a company for long enough.
Typical Tasks Include:
- Inform investment decisions by analyzing financial information to forecast business, industry, or economic conditions.
- Prepare plans of action for investment, using financial analyses.
- Evaluate and compare the relative quality of various securities in a given industry.
- Recommend investments and investment timing to companies, investment firm staff, or the public.
- Present oral or written reports on general economic trends, individual corporations, and entire industries.
Being a Financial Analyst provides you with the following valuable skills
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