One of the most sought-after jobs in the financial services space is that of a Financial Analyst. Financial Analysts, also known as Financial Research Analysts, can work in both junior and senior positions within a corporation, and it is a sector that frequently leads to further career prospects.
Financial analysts are in charge of carrying out a range of research duties to support their clients’ or their own companies’ investment strategies and make investment judgments. These jobs include a lot of data and call for excellent mathematical and analytical abilities.
The financial services industry is demanding, and breaking into the analyst field can be difficult, but there are some steps you can take to equip yourself for this job. If you want to be a Financial Analyst, there are a few things you should know to get started.
Employers’ demand for qualified associates to give financial analysis for their organizations is increasing as the commercial and financial markets have recently grown. According to Forbes, by 2026, the expanding demand for financial analysts will exceed the demand for specialists in many other fields.
Someone who appreciates math and analytical thinking may want to learn how to become a Financial Analyst but is uncertain of what the job requires or what chances are available.
This article serves as a guide for people interested in pursuing a career as a Financial Analyst.
Let’s get started with Financial Analyst Career Guide!
Table of Contents
Overview of Financial Analysis
As a Financial Analyst, these are the three basic understanding,
- Explain what financial statement analysis is, why it is needed, and what it is used for;
- Recognize the parties who are interested in financial statement analysis;
- Understand the various methodologies and instruments for financial statement analysis;
These three fundamental concepts serve as the cornerstone for any Financial Analyst’s career growth.
Let’s now break down these three concepts and view them individually.
What Are Financial Statements?
Financial statements are summaries of data that describe a company’s operations and financial performance. Financial statements are routinely audited by government officials, accountants, firms, and others to ensure their accuracy and for tax, financing, and investing objectives.
These are the following financial statements:
- Balance Sheet: The balance sheet is one of the three basic financial statements and is essential for both financial analysis and accounting. The balance sheet shows the overall assets of the company as well as how the assets are financed, either through debt or equity.The balance sheet is built around the basic equation: Assets = Liabilities + Equity.
- Income Statement: The Income Statement is one of a company’s primary financial statements that shows its profit and loss over time. Profit or loss is calculated by adding all revenues and deducting all expenses from both operating and non-operating activities.
- Statement Of Cash Flows: The Statement of Cash Flows, often known as the cash flow statement, is one of the three basic financial statements that reports the cash generated and spent during a given period, such as a month, quarter, or year. The statement of cash flows serves as a link between the income statement and the balance sheet by displaying how money moves in and out of the organization.
The information obtained in the financial statements is insufficient to draw a meaningful conclusion. As a result, effective financial statement analysis and interpretation are essential.
Financial analysis is also known as financial statement analysis and interpretation. It is the process of developing a meaningful relationship between multiple parts in any two financial statements.
Financial statement analysis is an approach to evaluate a firm’s efficiency and performance. As a result, financial statement analysis and interpretation are critical for determining the efficiency, profitability, financial soundness, and future possibilities of business units.
What Is The Purpose Of Financial Analysis?
- Evaluating Profitability: A business’s primary goal is to generate an acceptable return on the cash invested in it. Financial analysis can help determine whether or not the capital invested in the business is yielding appropriate returns. It also assists in determining the ability to pay interest and dividends.
- Identifying Achievement Trends: Financial statements from prior years can be compared to determine the trend in various expenses, purchases, sales, gross profits, and net profits, among other things. The value of assets and liabilities may be compared, and the company’s prospects can be predicted.
- Assessing The Company’s Growth Potential: The company’s trend and other analyses provide enough information to determine the company’s growth potential.
- Comparative Position Concerning Other Businesses: The goal of financial statement analysis is to assist management in conducting a comparative analysis of the profitability of various firms involved in comparable operations.
- Assess Overall Financial Strength: Financial analysis aims to determine the financial strength of a company. The analysis also aids in determining whether finances required for the purchase of new machines and equipment are available from internal business sources, and if so, how much. Also, to determine how much money has come in from other sources.
- Assess The Firm’s Solvency: The many techniques of analysis tell us whether the firm has enough finances to meet its short-term and long-term liabilities.
Who Are The Parties Interested In The Financial Statement Analysis?
Financial analysts perform financial statement analyses for the parties listed below.
- Investors: Shareholders or proprietors of a firm are interested in the company’s success. They are interested in the company’s earning capabilities and future growth prospects.
- Management: The financial situation and performance of the company as a whole, as well as its many divisions, are of importance to management. It aids them in the preparation of budgets and the evaluation of various division heads’ performance.
- Trade Unions: Financial statements are important to trade unions when negotiating wages, salary, and bonus agreements with management.
- Lenders: Debenture holders, loan and lease suppliers, and other business leaders are interested in understanding the entity’s short and long-term solvency.
- Suppliers And Trade Creditors: Suppliers and other creditors are interested in learning about the company’s solvency, or its capacity to pay its debts when they become due.
- Tax Authorities: Financial statements are of relevance to tax authorities when evaluating tax liability.
- Government And Its Agencies: The government and its agencies require financial data to control the activities of businesses and industries and to set tax policies. They make recommendations for policies and regulations.
- Stock Exchange: Financial statements are of importance to stock exchange members for analysis since they provide relevant financial information about companies.
Financial Statement Analysis Techniques And Tools
Let’s have a look at some of the techniques and tools that Financial Analysts practice.
- Cross-Sectional Analysis: Financial Analysts use this technique to compare a particular company to its industry peers. Cross-sectional analysis may focus on a single firm for head-to-head comparisons with its main competitors, or it may approach it from an industry-wide perspective to discover companies with a certain strength. Cross-sectional analysis is frequently used to evaluate performance and investment prospects using data points other than balance sheet numbers.
- Horizontal Analysis: This includes comparing an organization’s financial outcomes for many successive reporting periods side by side. The goal is to identify any data spikes or drops that could serve as the foundation for a more in-depth assessment of financial performance.
- Vertical Analysis: This is a proportionate examination of the income statement’s various expenses as a percentage of net sales. The balance sheet can be analyzed in the same way. These proportions should be consistent throughout time; if not, the causes for a percentage shift might be investigated further.
- Liquidity Analysis: This is a thorough examination of working capital, which includes calculating turnover rates for accounts receivable, inventories, and accounts payable. Any deviations from the long-term average turnover rate should be investigated further, as working capital is a significant user of cash. It can also be useful to assess if any strategic or tactical changes in a corporation have affected liquidity levels;
- Profitability Analysis: This is an examination of the profits made by a company. Profits can be segmented by product, product line, geographic location, subsidiary, individual store, and so on. A profitability study is most often only performed for the business as a whole in a smaller business with few products. This study may result in decisions to change price points, revise product configurations to reduce costs, eliminate overhead expenditures, and so on.
In the next section of the Financial Analyst Career guide, we will discuss who is a financial analyst.
Who is a Financial Analyst?
A financial analyst is someone who offers business predictions for an organization based on the analysis they conduct on issues such as market trends, a company’s or companies’ financial health, and the projected outcomes of a specific type of deal.
Analysts often have business, finance, or accounting degrees and are numbers-driven professionals who are comfortable reading data and making recommendations based on that data.
One of the most common professional paths in finance is that of a financial analyst. This is partly because analysts can work in a variety of businesses, as well as the field’s many advantages, including a high earning potential. If you have a background in business or finance, a position as a financial analyst is well worth exploring.
Financial analysts typically concentrate on trends impacting a given industry, geographic area, or product type. For instance, an analyst may focus on the power industry, a global region such as Eastern Europe, or the foreign exchange market.
They must comprehend how new legislation, policies, and political and economic trends may influence investing decisions. Investing is growing more global, and some financial analysts focus on a specific area or region.
Companies want their financial analysts to be fluent in the language, culture, business environment, and political climate of the area or region they cover.
Types of Financial Analysts
Financial Analysts are categorized into two types,
- Buy-Side Analyst: A buy-side analysts’ work is considerably more about being accurate; helping the fund with high-alpha ideas is critical, as is avoiding large errors. The tasks don’t appear to be that dissimilar daily. Buy-side analysts will read the news, track information, construct models, and otherwise go about their job of trying to improve their expertise on their area of responsibility to make the best stock recommendations.
- Sell-Side Analyst: These analysts are usually on the sell-side and are said to offer an unbiased view based on private research on a company’s securities. In simple terms, a sell-side research analyst’s role is to track a group of firms, most of which are in the same industry, and to produce frequent research reports to the firm’s clients. The analyst will often construct models to estimate the firm’s financial performance as part of this process, as well as speak with customers, suppliers, competitors, and other industry experts.
I Hope, Financial Analyst Career Guide article is helping you in all ways.
What Are The Roles Of A Financial Analyst?
Financial analysts use their strong accounting and compliance credentials to investigate previous financial data, forecast future outcomes, and enhance processes and policies. Financial analysts’ day-to-day roles include:
- Examining current and historical financial data and performance
- Reports and projections will be prepared based on this information.
- Taking current capital expenditures and depreciation into account
- Investigating investment opportunities
- Creating and assessing profit plans
- Monitoring financial performance trends and making recommendations for improvement
- Reviewing financial information and forecasts with other members of the finance team.
- Preparing Financial modeling and forecasting
In the next section of the Financial Analyst Career guide, we will discuss the skills and education required to be a financial analyst.
Skills And Education Required To Be A Financial Analyst
The following are the most preferred skills and aptitudes in financial analyst job postings:
- Unique methodology
- Wide awareness of many societal and economic issues
- prudent decision-making
- Excellent communication skills are required for counseling clients.
- Command of financial analysis and business computer software (Microsoft Excel, Bloomberg).
- Knowing how to conduct a financial analysis isn’t enough; Analysts in this field must also be able to make difficult decisions and convey them to stakeholders.
A bachelor’s degree is required for the majority of positions. Accounting, economics, finance, statistics, mathematics, and engineering are among the subjects of study that provide enough preparation. Employers require a master’s degree in business administration (MBA) or a master’s degree in finance for advanced roles. It is necessary to understand option pricing, bond valuation, and risk management.
Certifications And Licences:
In addition to a bachelor’s and master’s degree, obtaining certification in several areas of finance would give you an advantage as a candidate. Certifications such as Chartered Financial Analyst (CFA) cover a wide range of financial topics. Certified Public Accountant (CPA): This credential is for those who desire to work in financial auditing and attestation.
CFI’s Certified Financial Modeling and Valuation Analyst (FMVA) certification help candidates advance their careers as well as their financial knowledge.
- Analytical Skills: To uncover profitable investments, financial analysts must analyze a wide range of information.
- Communication Skills: Financial analysts must communicate their suggestions to clients in simple, easy-to-understand language.
- Technical Skills: Financial analysts must be able to evaluate financial data, spot trends, build portfolios, and make forecasts using software packages.
- Decision-Making Capabilities: Financial analysts must make a recommendation on whether to buy, hold, or sell a security. Fund managers must make trading decisions in fractions of a second.
- Detail Oriented: When examining potential investments, financial analysts must pay close attention to details because minor issues can have major consequences for an investment’s health.
- Mathematics Skills: When calculating the value of financial securities, financial analysts employ mathematical skills.
Typical Designation Of Financial Analyst
This section of the Financial Analyst career guide gives a complete overview of the different types of designations of a financial analyst.
1. Investment Banking Analyst: Analysts in investment banking assist organizations in developing or maintaining effective investments that satisfy their financial objectives. They examine a company’s needs, identify its goals, and explore new investment options. If the company already has investments, they may assess them to determine which ones are working well and which ones should be replaced.
2. Equity Research Analyst: A sell-side firm, such as a pension fund or wealth management firm, and a buy-side firm, such as a bank or brokerage, employ equity research analysts in the securities industry. They produce stock and company research reports, recommendations, and estimates. A small set of companies in a specific country or industry is usually the focus of an equity research analyst.
3. Treasury Analyst: Often, a treasury analyst works for businesses and government bodies. They’re in charge of controlling and managing an organization’s financial operations, such as investment income, liability, asset levels, credit, and cash flow. They may also make suggestions for how a company’s financial health might be maintained or improved.
4. Risk Analyst: Risk analysts assist businesses that want to invest in or grow into new markets or geographies. They examine strategies and offer financial guidance to boost or maintain revenues, reduce risks, and foster growth. Risk analysts also conduct comprehensive research to assist businesses in making sound financial decisions.
5. Rating Analyst: Rating analysts evaluate a company’s or government agency’s capacity to pay its debts, including bonds. These ratings assist investors in determining the risk of investing in a given company, market, or investment product.
6. Budget Analyst: By maintaining a balanced budget, a budget analyst assists businesses in keeping track of their finances. They prepare regular financial reports, consult with executives about funding requirements, and assess budget decisions for special programs and one-time costs. Budget analysts examine current and previous spending, assist businesses in planning for the future, and weigh the advantages and disadvantages of significant acquisitions.
7. Portfolio Manager: Portfolio managers help their clients plan and maintain investment plans. They may collaborate with other financial experts to identify investment opportunities that may assist customers in achieving their objectives.
8. Hedge Fund Manager: Companies hire hedge fund managers to help them manage their long- and short-term hedge fund investments. Individuals pool their funds and make huge investments in a variety of financial assets, such as equities, commodities, and bonds, to form a hedge fund. To determine which assets are the most beneficial, a hedge fund manager educates their clients on liquidity and fee structures.
In the next section of the Financial Analyst Career Guide article, we will discuss the salary of financial analysts.
What Is The Typical Salary Of A Financial Analyst?
According to Indeed, the average salary for an entry-level Financial Analyst in the United States is $67,378 per year. Financial Analysts are paid between $127,248 and $106,146 by top companies in the United States.
Salaries Based On Experience Level
|Experience||Salary Per Year|
|< 1 year||$61,851|
|1 to 2 years||$63,773|
|3 to 5 years||$70,687|
|6 to 9 years||$76,779|
Highest Paying Cities in the US for Financial Analyst
|City||Salary Per Year|
|San Francisco, CA||$79,783|
|New York, NY||$71,144|
What Are The Benefits Of Being A Financial Analyst?
- In-depth Industry Knowledge: Financial analysts are responsible for producing real insights into a company’s financial performance and overall outlook, as well as assisting in the discovery of the driving factors that aid in the organization’s growth. This allows them to gain in-depth industry expertise and potentially open up new prospects.
- Networking: A financial analyst’s job is both versatile and multi-faceted. It also entails meeting with various company stakeholders. This can help you extend your professional network as well as develop personal relationships that you can use in the future if you require support.
- Higher Compensation: The position of financial analyst is regarded as one of the most rewarding. A financial analyst’s compensation is typically higher than that of other professionals at the same level. Financial analysts are entitled to a reasonable bonus and commission in addition to their fixed compensation.
- Job Safety: Job stability is a plus for financial analysts because of the nature of their work. Financial analysts are highly trained specialists with access to sensitive company data. Analysts are less likely to lose their jobs in uncertain times because of their sophisticated nature. In addition, hiring a new specialist in a short period of time is difficult and costly for the organization.
- Work-life Balance: One of the finest aspects of working as a financial analyst is the work-life balance. People in the banking profession frequently express dissatisfaction with the lack of work-life balance. Investment bankers make more money, but at a larger personal cost; they work at least 70-80 hours per week. A financial analyst’s job, on the other hand, simply necessitates standard business hours.
Demands For Financial Analyst
The demand for financial analyst specialists is increasing by double digits, providing a plethora of chances for those interested in a career in finance. Financial analysts are required not only in the finance sector but also in other companies that rely on data science to build their companies.
Where Do Financial Analysts Works?
Financial Analysts, to put it plainly, assess investment prospects. Banks, pension funds, mutual funds, securities firms, insurance firms, and other industries use them. Securities analysts and investment analysts are other terms for them.
Is Financial Analyst Certification Helpful To Get A Job?
The FMVA certification is quickly gaining traction among financial executives and bankers. When compared to some of the more specialized certificates like the CFA or FRM, which focus on one single component like investing or risk, it has a broader appeal. Now the question is whether this certification is beneficial for you.
Do you have the ability to quickly construct a financial model and want to improve your financial modeling and valuation skills? This curriculum is designed specifically for you.
Let me give you a quick overview of this course.
The entire FMVA curriculum is available as a self-study or full-immersion option. One can register in the entire program or choose Prep courses, Core courses, or Elective courses, with FMVA course costs ranging from $97 to $847. Overall, the courses offer an excellent combination of theory and practical. To know more read CFI FMVA Reviews.
Self-study courses can be completed from the convenience of your own home, workplace, coffee shop, garden, or anywhere else you have internet access. For $497, you can gain access to such courses for two years.
All courses (Prep, Core, and Elective), Certification, Quizzes, Assignments, Tests, Excel, PPT, PDF Files, and a Digital Blockchain Verified Certificate are included in the bundle.
Full immersion courses feature all the learning experiences offered by the Self-Study Version, plus additional benefits. The additional benefits like FMVA certification Full Immersion bundle is a comprehensive curriculum that provides real-world insights into the tasks that financial analysts engage in on a daily basis.
Along with the features listed above, the FMVA full immersion package offers a PitchBook, private equity, venture capital, and mergers and acquisitions database, making it the ideal tool for completing all FMVA® courses and allowing professional investors to use this program to gain precise insights into public and private market data. Advanced financial modeling templates are also included.
The practical part of this course prepares you for real-time analysis at the workplace, which increases your chances of advancing your career with this FMVA certification.
If you want to improve your financial modeling and valuation skills, this course is for you because other finance courses can be quite expensive and time-consuming.
There are several methods for saving money on FMVA course fees by learning the necessary skills. These are described below:
Self-study bundle: Instead of enrolling in a full-immersion curriculum, if you are an individual user/student, you can access all of the courses for $497 for two years. If you are an enterprise wishing to upskill your employees, you can purchase an all-access subscription for $499 per user each year. You can also request a free demo before making a purchase!
Scholarships: CFI provides annual bursaries(worth $500 to students who demonstrate a strong interest in finance.
Also read, CFI Review.
In conclusion to the Financial Analyst career guide article, A career as a financial analyst demands planning and dedication. It also has the ability to provide genuine gratification from being a vital part of the corporate environment, in addition to financial incentives.
Below listed are the Faqs related to the Financial analyst career guide article:
1. What are the employment prospects for financial analysts?
As per the Bureau of Labor Statistics, the job market for financial analysts is predicted to grow at a rate of roughly 6% per year for the next 10 years.
2. What is the potential for financial analysts to advance in their careers?
With experience, analysts can advance to portfolio managers, where they choose investment instruments. They can also work as fund managers, managing enormous financial portfolios for corporations or individual investors.
3. Is it possible for financial analysts to work from home?
Since the pandemic, most companies have asked their financial analysts to work from home.
Hope Financial Analyst Career guide article was useful!
Author at OnlineCourseing