Financial Analyst - As a career option

Introduction

In this age of numerous options for buying and purchasing, one needs to think clearly before investing. Hence, the thought that we put in our decisions regarding investment of money is what we can call Financial Analysis.

When we buy a product today we check its price range, its added assets and value, and how feasible is it for the cost that we need to pay for it. All these things comprise the factors which govern the science of Financial Analysis.

Financial analysis is also referred to as financial statement analysis or accounting analysis or Analysis of finance. This profession refers to an assessment of the viability, stability, and profitability of a business, sub-business, or project, or any kind of investment.

It is performed by professionals who prepare reports using ratios that make use of information taken from financial statements and other reports. These reports are usually presented to top management as one of their bases in making business decisions.

How does a Financial Analyst help businesses?

Businesses today have become a complex affair. Sitting inside comfortable office environments, officials are constantly under pressure of seeing to the production and profits of the organisation.

This is where Financial Analysts step in and guide the higher officials, doing the groundwork for them in terms of calculations and stats. This is a highly responsible job as all projects in the pipeline of a company/organisation need to go through this analysis.

A Financial analysis may determine if a business will

• Continue or discontinue its respective operations
• Make or purchase certain materials to manufacture products
• Acquire or rent/lease certain machinery for production purposes
• Issue stocks or negotiate for a bank loan
• Make decisions regarding investing or lending capital
• Make decisions that inform the management of the various alternatives for a business plan, etc.
  
  

A financial analyst assesses businesses from several viewpoints- performance, stability, growth, credit-worthiness, etc. by going through the financial statements namely, Balance Sheet, P/L Statement and Cash Flow Statements and taking into account any financial news relevant to the business in question.

Elements of a Firms assessed by Financial Analysts

• Profitability: Based on the income statement, which reports on the company’s operations
• Solvency: Ability of an enterprise to pay its obligations to creditors and other third parties
• Liquidity: It refers to the positive flow of cash, while simultaneously satisfying immediate obligations.
• Stability: The firm's ability to remain in business in the long run, without having to sustain significant losses in the conduct of its business. Assessing a company's stability requires the use of both the income statement and the balance sheet, as well as other financial and non-financial indicators. etc.
  
  

By the application of these elements, financial analysts can decipher the ability of a business enterprise to earn income and sustain growth in both short and long term.

Eligibility criteria to become a Financial Analyst

In order to become a Financial Analyst, a candidate must have attained a graduation degree with mathematics as one subject.

Additionally, a degree in business administration, accounting, economics, finance and statistics benefits a lot in getting jobs in financial organisations.

The CFA programme offered by the ICFAI can be pursued either full time or part time depending on the time and interest.

There are various other routes to becoming a financial analyst. For example: pursuing a Bachelors in Commerce and following it up with a Masters, Chartered Accountancy, Company Secretaryship, etc.

Students who are aspiring to be career analysts should start studying commerce and finance subjects from their school level as numerous schools offer business management and mercantile law at a school level.

Additionally, soon after the completion of 10+2, candidates may apply for a CA course to become a financial analyst. An aptitude for numbers and finance helps candidates grow further in the career as a financial analyst.

Depending upon the inclination one can try for better career options as a financial analyst called buy-side analysts whose job is to work for hedge funds, FOREX, fixed income analysis, investor relations management, etc.

A day in the life of a Financial Analyst

Hi. I’m a junior financial analyst and I typically spend the majority of my time in gathering relevant data and mulling spreadsheets for financial models.

I also spend a lot of time and effort in keeping up to date with relevant industry news and publications. It’s important to develop a solid fundamental understanding of the industries I have clients in.

9:00 AM: Just got to work. I browsed major headlines on my way to work to keep an eye out for any major market-moving events that might have occurred while I was sleeping. My senior analyst would never let me live it down if he got to it before I did.

10:00 AM: I make my way to our daily check-in meeting. It’s usually the senior analysts weighing in here, but we are encouraged to attend so that we can learn a little through passive osmosis. A senior analyst is presenting an investment opportunity to the Board, and I take copious notes.

12:00 PM: This took a while as the strategy that we’re working on is fairly complex. The proposal was a cost-benefit analysis of including green technologies in one of the biggest IT parks one of our clients are planning in Greater Noida.

My immediate senior texts me to check in with the trading desk regarding unusually high trading volume in a particular stock.

1:30 PM: Big team meeting as we sit down and review transcripts and earnings release from the prior quarter in advance of the earnings release.

3:00 PM: We take a break for lunch.

5:00 PM: An earnings report is released. The junior analysts - which includes me and a few others are responsible for updating the team's financial model and research note template using data from the earnings release.

On the side, I also jot down notes for the company's management team. This will go for approval to the boss who will no doubt point a hundred mistakes in it. We sit on it until 9:00 PM, and then slowly leave for home.

This is a cut-throat, competitive job requiring critical thinking skills, but there must be something wrong with me because I happen to love it! Do you also want to become like me?

We hope this article has added something valuable to your research about this profession.

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