Things You Must Understand Before Becoming a Financial Analyst

What is Financial Analysis?

Financial analysis is the evaluation of a company in progression to manage its profitability, liabilities, strengths and potential of the future earnings. A broad mixture of procedures may be practised to evaluate an organization’s financial viability including the most popular methodologies of horizontal analysis, vertical analysis and ratio analysis. Most analytical methods involve the company’s financial statements, internal or external audits, and investigations. In the financial services industry, Financial Analysis plays a very important role. Financial Analysts research macroeconomic and microeconomic conditions, study financial statements – Cash Flow Statement, Balance Sheet and Income Statement – to understand ratios and deduce other financial information in order to make business, sector and industry recommendations to the company. Nevertheless, there are several things you must to know before you comprehend this path, which is why this blog is here to sort out all your introductory issues, such as what diploma to choose, the salary of a financial analyst and about the job opportunities?

Job Profile of a Financial Analyst

Now that we have built the foundation of the financial analysis, it is easier to understand the job and tasks job of the financial analyst. Basically, a financial analyst is the genuine person who takes care of the company’s or client’s financial statements, accounts or capitals, draws out reports using the data, manifests them to the company’s management and assists them to make applicable judgments for the company’s future. Below are three different types of financial analysts.

1. The sell-side financial analyst

A sell-side analyst works for a brokerage firm and assesses companies for projected profits, growth and different investment patterns. They sometimes put suggestions on stocks or other securities, typically phrased as “buy”, “sell”, or “hold.”

2. The buy-side financial analyst

The buy-side analyst is an analyst who operates with fund managers in mutual fund companies, financial advisory firms, and other firms, such as hedge funds, trusts, and proprietary traders.

3. The in-house financial analyst

The in-house financial analyst. This is the typical analyst found in any company. They look for aberrations in these balances and do the financial forecast for the coming year or business quarter. The in-house analyst usually evaluates the budget of the company as a whole and that of its departments and compares it to the spending and the salaries so that he or she can make sure the company is on track.

Courses Required to be a Financial Analyst

Usually, maximum companies need a bachelor’s degree in a financial relevant course, because you are required to understand the basics. However, you can also get into this career if you have a master’s degree either in finance or in business administration and you then take some financial analysis courses on the side. Below are a few courses, which could help you to become a financial analyst.

1. Financial Modeling

If you are looking for a short-term hands-on program to kick-start your career in Financial Analysis, then Financial Modeling is the relevant program for you. The syllabus includes extensive coverage of Financial Statements Analysis, besides training the candidate in Economic Analysis (this helps to understand the macroeconomic situation and can be used to infer a company’s financial status in economic upswings and downswings). In addition, the course also includes studies on Financial Markets and Financial Management. View more here.

2. CIMA (World’s largest professional body of Management Accountants)

If you are looking for a globally recognized qualification which can help you to get a foot-hold in Financial Analysis, then the CIMA is the relevant program for you. The CIMA syllabus trains candidates in Financial Accounting, Mergers and Acquisitions, Valuations, Corporate Finance, Regulatory Reporting etc. The CIMA certification, therefore, gives the candidate a comprehensive grooming in financial analysis.  More than 4000 MNC recruits CIMA Qualified Professionals.  The average salary of CIMA Professionals in India is above Rs.8 lakhs. View more here.

3. Post Graduate Diploma in Financial Analysis and Modeling

If you are pursuing graduation or are a fresh graduate and are interested in building a long-term career in Equity Research, then the 9 months PG Diploma in Financial Analysis & Modeling is the ideal program for you. This program will also help you to prepare for the world’s leading qualification in the field of Investment Analysis i.e. the CFA Program. View more here.

Skills Required to be a Financial Analyst

As a financial analyst, you should have a definite and distinct collection of skills, so that you can achieve the necessary analysis of the data about investment plans for the companies or clients.

1. Mathematics

Usually, a financial analyst needs mathematics to solve all the problems.

2. Intricate Problem Solving

You are required to able to solve every problem that occurs your way and obtain a suitable solution for your client.

3. Decision Making  

This is a very important skill which each and every financial analyst must possess. Considering the factors such as the costs and profits of implied actions, you should able to choose the right one.

4. System Analysis

You must be able to recognize how a system operates and, also, how it demands to be substituted in order to generate valid results.

5. Persuasion

According to the fact that you will be primarily flinging ideas to your clients about their financial investment for that, you are supposed to be persuasive.

Responsibilities of a financial analyst

  • Analyzing financial information to estimate forecasts for the industry, business, & economic environment in order to make investment decisions.
  • Preparing spreadsheets, graphs, and charts to help illustrate financial trends regarding inflation, interest rate, etc.
  • Presenting financial information such as – Cash Flow Statement, Balance Sheet and Income Statement to managers.
  • Preparing revenue and expense forecasts in order to make financial decisions
  • Creating and reviewing financial records of a company
  • Maintaining knowledge and staying abreast of keep abreast of new regulations or policies in business law, taxation, financial reporting regulations that may affect investment policy.

Pay-scale for a Financial Analyst

A Financial Analyst earns an average salary of Rs 355,717 per year. The skills that increase pay for this job the most is Valuation, SAS, Budgeting, Financial Modeling, and Financial Reporting.