Project One Financial Analyst Job Aid - Copy PDF

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3-2 Project One: Financial Analyst Job Aid

Southern New Hampshire University FIN-320 Principles of Finance

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Financial Analyst Job Aid Financial Responsibilities Financial analysts in an organization are responsible for various activities in terms of management which include: •Collecting data and information. A financial analyst's work begins by gathering both data and statistics about any issue they would wish to examine. Some of the data and information financial analyst gathers may include accounting data from the general ledger, financial reports, stock price information, and macroeconomic data. Such information and data are derived from company sources such as internal databases, third-party information providers, and government agencies such as the securities exchange commission. •Organizing both financial and investment information. After a financial analyst collects data, he/she typically enters it into the company's databases or Microsoft excel to organize it. The data is then cleaned and put into a suitable format that anyone can easily understand. It typically involves sorting such data by category and adding purposes to make it lively using consistent formatting styles. •Analyzing financial data results. After cleaning or sorting and organizing financial data in excel or any other relevant accounting software, financial analyst starts to analyze such historical information results. It involves looking at financial ratios and metrics like gross margin, return on assets, earnings per share, and others. The financial analyst may even look for the changes and benchmark the performance compared to other companies in the same industry. •Making forecasts and projections. After financial analysts analyses financial data projects and forecasts on how the company will perform in the future. It involves both the art and science of predicting the future performance of the firm. Forecasting a firm's future performance always depends on methods like regression analysis, year over year growth rates. •Developing appropriate recommendations. A financial analyst will generate awareness and recommendations on how to develop a business or company's operations. It involves recommending ways to reduce costs, increase market share, increase revenue growth, operational efficiencies, and many others. Such recommendations are presented to company management or directors for decision-making regarding improving the effectiveness of company operations.

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Financial Management Decisions Financial management within the organization plays a significant role in making business decisions, especially running a successful business. With financial management, the company management can have all data and information regarding financial planning, acquisition of funds, improving profitability, and allocating and utilizing money acquired. With all this information, the company management can make sound decisions that ensure its operations' effectiveness. It is the only financial analyst or any other financial professional who can give this information to organization management, hence being very important for the company operations. If the finance department or financial analysts fail to give out such information, the company will fail or have difficulties in its operations. Accounting Principles Accounting principles are the rules and procedures that corporations need to follow while reporting financial and account data. These principles play a significant role in analyzing a company's financial strengths since known and standard procedures are supposed to be followed, and it is easy to track where they are not fully applied as it is supposed to. Thus, these principles ensure that every step-in financial reporting is followed, producing actual, accurate, and reliable financial information used in making decisions. Hence playing a vital role in the company's financial health. For the financial analysts to make sound or good recommendations, some accounting information is needed. Such information is derived from statement of financial position, income statements, and cash flow statements which provide bases for the recommendations, and if such information is not accurate, it is easy for the financial analyst to know. This is because they verify such information by use of accounting principles. Financial Statements Financial analysts depend on statement of financial position, profit and loss account, and cash flow statement information to perform their duties. For the balance sheet, they get information to get ratios like return on assets and for the income statements to get profits that the company is making and compare with previous financial years. Furthermore, lastly, for the cash flow statement, they will be able to know how company cash is flowing. All this information helps financial analysts to make decisions like forecasting future performance, especially with company profits. Financial Terminology Financial statement  The financial statement refers to the records that convey a corporation's activities and financial performance of a company.  The financial analysts can use them to explain the organization's performance. Liquidity  Liquidity refers to the simplicity of the asset to be converted into ready cash.  Financial analysts use the term liquidity to express the firm's ability to meet short-term liabilities.

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Working capital  Working capital is the difference between the company's current assets and liabilities.  Financial analysts use this term to measure a company's liquidity. Diversification  In finance, diversification means a risk management strategy that mixes a wide variety of investments within a portfolio.  Financial analyst uses this term to express the portfolio at risk. Time value of money  Time value of money is the concept that the money one is holding now is worth how much.  Financial analysts use this to explain the value of money at a specific time....