Data science has been playing a revolutionary role in the evolution of the banking and finance industry. Business decisions and future projections are no longer based on wild guesses and ambiguous assumptions. In the 21st century, businesses decisions are backed by relevant data that provides valuable insights. Now, the big question here is how will companies leverage data?
Well, the data science industry is fairly new and growing. To harness the power of data companies employ analysts who specialise in making sense of data. Financial decision-making for companies is very crucial and requires expertise in the domain. Financial analysts are employed by companies to help save fortunes and develop a strategic growth plan.
The increase in demand for financial analyst professionals has made it a lucrative career prospect for individuals. Financial analyst certification helps to establish credibility and increase the job prospects for individuals looking to work as financial analysts. Let’s jump into some of the major roles and responsibilities of a financial analyst.
Responsibilities of a Financial Analyst
Financial analysts play a crucial role in the functioning of an organisation. They help to discover real and valuable insights after conducting a thorough analysis of the data obtained from various sources. They help to identify valuable investment opportunities for companies and help them grow their business in new avenues after doing an in-depth cost-benefit analysis.
They are responsible for working with the accounts department to ensure accurate financial reporting. They are also responsible for performing market research and conducting data mining. Creating financial models like Mergers and Acquisitions (M&A) model, Leveraged Buyout (LBO) model, Discounted Cash Flow (DCF) model, etc. is also the part of their job role.
The role of a financial analyst also varies a great deal depending on the type of organisations they work at. The degree and scope of work also vary to a large extent on the size of the organisation. Financial analysts are primarily employed by insurance firms, banks, investment firms and KPOs. Most financial analysts prefer to work with investment, either for a buy-side investment firm or sell-side investment firm. The major responsibilities of financial analysts are listed below.
Collection and organisation of information
The first step to conduct any research work is to gather valuable and relevant data that can be used to achieve the desired objective. Financial analysts are responsible for the collection of relevant information and organisation of the data into presentable formats that can be easily understood by the stakeholders. These data might include accounting related information finance metrics, economic data, general stats, etc. These data are collecting using company database or third party providers like Bloomberg.
Analysis and Projections
The collection and organisation process is followed by conducting a thorough analysis to obtain valuable information regarding the company’s financial positioning. The historical performances are analysed after collecting relevant variables to the analysis process. These might include financial data such as inventory turnover ratio, year on year growth rates, liquidity ratio, an asset to liability ratio, profit margins (gross and net), etc.
After the analysis is conducted, the projections and predictions regarding the company’s future performance are made. Various projection methods including regression analysis, bottom-up bottom-down approach are used to predict future movements and take desired actions.
Building recommendations is a crucial responsibility of financial analysts. Collecting data and conducting analysis helps to identify the problems. The projections are related to unveiling future scenarios. The recommendations process is all about providing suggestions and coming up with solutions to tackle those problems. This might include finding new growth trajectories, identifying profitable investment opportunities, cutting down losses, etc.