FIN 320 3-2 Project One Financial Analyst Job Aid PDF

Preview

Summary

This was great class information was not easy but I hope this helps with something if you have lost your way....

Description

FIN 320 Project One Financial Analyst Job Aid This job aid aims to provide an overview of the day-to-day responsibilities of a financial analyst and describe the role financial management plays in an organization. Financial Responsibilities















Gathering Data and information. The work of a financial analyst begins with the collection of data and information about anything to analyze. Examples include historical financial reporting, general ledger accounting data, inventory price data, statistics and macroeconomic data, industry research, and almost any quantitative data other than these. Information from sources like internal databases for the company, third-party providers such as Bloomberg or Capital IQ, and government agencies including the Securities and Exchange Commission will be gathered (SEC). Information Organization. Once the Data is collected, Excel or any other type of database will usually be entered. The next task, once entered, is that it should be organized, cleaned, and formatted. Generally involves sorting numbers by category or data and adding formulae and functions to ensure that it is dynamic while using consistent formatting styles to make reading and understanding easy. See additional tips for formatting Excel. Analyzing financial results. The financial analyst must analyze past information and historical results by cleaning up the information and organizing it in Excel. This typically covers ratios and metrics such as gross margin, net margin, fixed vs. variable costs, annual growth (YoY) rates, equity rates (ROE), asset return (ROA), debt and equity ratios, share income (EPS), etc. The analyst will search for trends and assess the performance of other companies in the same industry. This is one of the most significant components when asking what a financial analyst does. Making forecasts and projections. After analyzing historical information, it is time to project and predict the company's future performance. There is both an art and a science to predict how a company performs, which requires many assumptions and even springs of faith. Standard methods include regression analyzes, growth rates year over year, and bottom-up and top-down approaches. Read more in the CFI Curriculum for Budgeting and Prediction. Developing recommendations. A good financial analyst has good numbers and provides insights and guidelines on improving a business's operations. Examples of valuable recommendations and insights include cost-cutting, revenue growth opportunities, market share improvement, operating efficiency, customer satisfaction, and many more. This is what separates a financial analyst of the world-class from the others. The CEO, the CFO, other managers, and the Board of Directors shall be provided with these recommendations. Building Models. Financial modeling will be a significant factor for analysts in investor banking, equity research, corporate development, financial planning, and analysis (FP&A). Typically, these models start with a link between the three financial statements, followed by more advanced financial types like a reduced cash flow analysis (DCF) model, internal planning, and more arcane models like LBO models and M&A models. Generating reports and presentations. When asked what a financial analyst does, the answer is always something to do with making presentations (often in PowerPoint). The analysis

completed in Excel must then be converted into charts and graphs that can be inserted into pitchbooks and management presentations. Internal reports and dashboards are a part of an analyst's daily life. Whether presenting key performance indicators (KPIs) or tracking actual vs. budgeted results, it is critical to the company or client that information is presented, timely, easy to understand, accurate, and insightful. Financial Management Decisions Financial management is one of the most critical responsibilities that businesses have. Financial managers must consider the potential effects of management decisions on profits, cash flows, and the company's financial condition. Every aspect of a company's operations has an impact on its financial performance. These influences are evaluated and controlled by financial analysts. Accounting Principles The GAAP is the procedure, standards, and principles that companies follow to prepare their accounts. They have generally accepted account principles. These principles support investments and the analysis of company accounts and other financial information by third parties. The fundamental principles applied are the principle of cost, the presumption of the period, the assumption, and the principle of the monetary unit. Without these principles and information from them, companies would not know how to ensure financial growth is in their business. Financial Statements Many financial statements are used to help companies decide. Some of the most frequently used statements are balances, income reports, and cash flow reports. Balance sheets are a summary of the financial balance of an enterprise and show a picture of a company's strength. The declaration of income is also known as the statement of profit and loss. These reflect the revenue and expenses of a company for a specific period. The aim is to demonstrate a company's performance by listing its sales, expenses, and profit and losses. Cash flow reports show a finite period of cash inflows and outflows. This is an important indicator of whether an undertaking can generate a healthy business with sufficient revenue. Financial Terminology

Financial statement  Definition: written records conveying a company's business and financial performance.  How this is used: Financial Data is used to analyze a company's performance and predict its future direction. Liquidity  Definition: means the efficiency or easiness of converting an asset or security to cash without affecting its market price.  How this is used: financial analysts are looking at the ability of a company to use liquid assets to meet its shorter-term obligations. Working capital

 

Definition: the difference between the current assets and inventories of the company and its current liabilities of raw and completed products. How this is used: work capital is required to remain solvent for a company. Companies cannot rely on accounting profits to pay their bills and rely on their working capital to meet their obligations.

Diversification  Definition: A strategic risk management which mixes a wide range of portfolio investments.  How this is used: financial analysts can diversify their portfolios to take advantage of risk. Aggressive investors can divide their investments between several funds to reduce risk, and potential rewards are increased. Time value of money  Definition: The idea that money you have now is worth more than the same amount in the future because of its earning potential.  How this is used: Time value of money is an integral part of financial planning and risk management. This is one of the most popular and important ways to assess investment opportunities.

References

ALTWP Admin, N. (2018, November 7). How Do Financial Statements Help Your Decision Making? Altima Business Solutions. http://www.altimabusinesssolutions.com/index.php/2016/08/29/financial-statementsdecision-making/. Fernando, J. (2021, May 24). Time Value of Money (TVM) Definition. Investopedia. https://www.investopedia.com/terms/t/timevalueofmoney.asp. Lioudis, N. (2021, May 19). The Importance Of Diversification. Investopedia. https://www.investopedia.com/investing/importance-diversification/....