7 things a financial analyst must know
Table of Contents
A financial analyst is a person who analyses investment performance and assesses the financial statements of different verticals to make business decisions. An analyst is solely responsible for monitoring macroeconomic trends in different sectors and industries; the role of an analyst, therefore, demands strong mathematical, analytical, and data interpretation skills.
Analysts can use data, research, and expert opinions to determine whether projects will work or not. Each type of analyst has different focus areas and levels of responsibility. They evaluate potential financial risks, manage cash flow and balance sheets, prepare annual reports and provide guidance to management on investment strategies.
Essential Skill-Sets of a Financial Analyst
Decision-making is about choosing the correct option out of many and deciding which one is best for the situation. It's about weighing the pros and cons of each option to see if it will work for you as an analyst. It's also about being able to justify the decision by ensuring it makes sense within the company's goals, mission, or vision.
As a financial analyst, this sort of thinking is essential because your task involves decisions like how much money to invest in different projects or products. One needs to be able to look at all the possible factors involved in making those decisions—like how profitable they will be and how much money they'll bring in—and make an informed decision that balances risk with reward while staying within budget guidelines.
- Corporate Finance
Corporate finance is the study of how corporations manage their finances. It involves deciding the sources of funds, investments, and capital structure. A classic example is a decision taken by a company involving a combination of debt and equity to fund its needs.
Financial analysts must come equipped with such knowledge in order to help companies manage their finances and make investment decisions. In order to develop the required expertise, students can opt for financial analyst courses.
- Technical Analysis
A financial analyst must be able to determine market sentiments based on price trends and detect patterns and indications.
Financial analysts need to understand the technical analysis based on statistical trends to build a perspective toward stocks, bonds, commodities, or any other financial module. This task involves using charts and graphs when analysing data about stocks and other investments.
- Mergers and Acquisitions Analysis
Mergers and acquisitions have an impact of epic proportions on the financial health of an organisation. Mergers and acquisitions analysis involves determining or predicting the results of such business acquisitions and the effect they will have on the financial well-being of the company.
Based on this information, the company can improve its revenue and market share, reduce costs and gain top talent; a chartered financial analyst course is a great way to acquire such a technical skill-set.
- Corporate Valuation
Corporate valuation is the process of determining the market value of an organisation or business entity. Valuation is crucial when it comes to acquisitions and mergers. As a financial analyst, one should be proficient in different financial tools to look at the market cap, capital expenditures, and taxation to determine the economic value of the entire business unit.
As a financial analyst, one is expected to calculate how much money the company has made in the past, what it will make this year, and what the future looks like for the business. Modeling covers the analysis of estimating how much money the company is spending each month on essentials, salaries, and benefits for employees.
Modeling enables analysts to understand how the clients' businesses work, and how the products they sell fit into those businesses. By doing so, analysts gain a better understanding of not just the client's business, but also help them make better decisions about what products to offer and how to allocate resources.
Having knowledge of financial modeling helps financial analysts estimate the profits, balance sheets, and cash flow statements. Financial modeling courses will help analysts learn the advanced metrics to handle modeling techniques.
- Software Skills
As an analyst, having a working knowledge of financial software like Tally, Excel, and SAP can help you get an edge over others and save time. Knowing how to use finance functions, lookup functions, data validation tools, what-if analysis, and pivot tables are some critical skills that an analyst must possess.
The demand for financial analysts will always thrive on driving businesses to the upside. Imarticus Learning understands the skills that industries require and has curated a course covering all important aspects to get you groomed and industry-ready. The Chartered Financial Analyst course by Imarticus Learning is a collaboration with KPMG in India that provides you with real-world training, through a detailed course structure and guidance in every module. Contact us through chat support, or visit our training centers in Mumbai, Thane, Pune, Chennai, Bengaluru, Delhi, Gurgaon, or Ahmedabad.
Kickstart your journey as a financial analyst today!