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A Guide to Financial Analyst Profession

A Guide to Financial Analyst Profession

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The activities of a company can be compared to going to an unfamiliar place. You can go wherever you want and possibly arrive at your goal. Or you can prepare, take a map, lay the best route and come to the goal faster and more effectively.

But in order to create such a route you need introductory information: a map of the area, the location of roads, hotels, gas stations, etc. And if we go back to our comparison with the company, the employee who collects, analyzes and structures the information to make a decision is a financial analyst.

What Does a Financial Analyst Do?

In a market economy, more and more companies are hiring financial analysts. For example, to analyze the market cap of a cashmere Industry. A financial analyst is a highly qualified professional whose list of responsibilities includes modeling and analyzing a company’s operations, industry and market trends, and risk analysis. Essentially, this is a person in a company who deeply and systematically analyzes external and internal circumstances that help make the right managerial decisions.

There are several types of financial analysis. Depending on what kind of analysis a company or enterprise needs, you can determine the nature of the analyst’s work. But despite some distinctions, the same employee can perform different types of financial analysis needed at a given time for a company. Let’s list the main ones:

Prospective Analysis

Otherwise it is called predictive or preliminary. This type of analysis is used to make strategic decisions and improve the efficiency of the company.

Operative Analysis

It is usually carried out according to such groups of indicators as production cost, cost-effectiveness, profit. In such an analysis may be subject to error, because it may begin before the end of the process, which means that some data is not yet available, but it can be predicted. Making forecasts helps to quickly and reasonably intervene in the process to make it more efficient.

Retrospective Analysis

This type of analysis allows you to evaluate the work that has been done over a period of time. It is usually based on statistical and financial statements, analyzes cash flows and financial risks.

The Main Tasks of a Financial Analyst

The following is a list of the basic, but not exhaustive, tasks that a financial analyst can perform. Often the list of tasks depends directly on the specifics of the company and the tasks that the business faces.

  1. 1.Calculation and analysis of the company’s development path, construction of the company’s financial model and lines of business
  2. Analysis of the company’s activities
  3. Analysis of information for point-to-point business decisions
  4. Tracking trends and trends in the industry of the company
  5. Collecting and processing analytical information
  6. Risk assessment
  7. Analysis of financial statements
  8. Analysis of accounting and managerial accounting

Why is a Financial Analyst an Important Employee in a Company?

Many mistakes in business could be avoided if the owner thought not about the past or present, but about the future. But often executives think like this: “Now my company is successful, it’s doing well. So there is no need to do anything, it will always be successful”. But the world is changing very quickly, and business models which were successful yesterday, may turn out to be absolutely hopeless tomorrow.

But often the business owner doesn’t understand where to start thinking about the future of the business. Our universal answer: thinking about the future of the business should start with building a financial model. This is essentially a description of your company and its development in monetary terms.

Millions and even billions of dollars in losses would be avoided if every CEO had a financial analyst around to model and show where this or that decision could lead. The job of an analyst is at most to mitigate risks, and at least to show the general picture of the world.

How to Become a Financial Analyst?

 The profession of a financial analyst is a suitable option for everyone who is interested in economics and finance, has no problems with mathematical calculations, construction of logical chains. A person must be willing to accept responsibility for business development and not be afraid of working with large amounts of data. This is an attractive opportunity for accountants who want to take their career to the next level. They already have the profile knowledge. If there is a desire and the necessary personal qualities, all that remains is to learn the actual methods of analysis.

Where to Get a Financial Analyst Education?

A college degree in economics and financial management will come in handy for a successful career as an analyst. But this is only the first step in gaining the knowledge you need to be successful. Later on, it is advisable to complete a master’s degree and take regular courses to improve your skills as a financial analyst. International diplomas from IPFM, CIMA, ACCA, CFA and others will be a great advantage. But a diploma is by no means the strongest proof of sufficient qualification level of a specialist in the field of financial analysis. Usually necessary set of hard skills is formed in analysts directly while working in commercial or investment companies.

Required Qualities for a Financial Analyst

As with any profession, the job of a financial analyst requires certain abilities and qualities, as well as competencies in economics and finance. First and foremost, an analyst must love working with numbers, think logically. Also important are qualities such as a systematic approach, focus on results, and attentiveness.  Knowledge of economic disciplines and financial analysis are necessary for an analyst.

Knowledge Requirements

The financial analyst’s professional arsenal includes knowledge of the following:

  • general economic – understanding of the mechanisms of macro- and microeconomic factors, changes in interest rates, inflation rates,
  • methods of analysis, compilation of statistics and forecasts in commercial industry,
  • legislation (especially taxation, business law),
  • domestic and international financial reporting standards,
  • principles of accounting and reporting,
  • investment principles, market theory and its changes

How Much Does a Financial Analyst Earn?

An experienced financial analyst is always a highly paid and scarce employee in the job market. However, it is important to understand that salary depends on several factors:

Experience

The first two to three years of work, you learn how to apply theoretical knowledge in practice.

It is important during this period to put as much effort and time as possible into mastering the basics of the profession. After this period your salary will increase in proportion to your experience, knowledge and skills, as only now you are capable of creating worthwhile value for the company.

Company Size and Outlook

A financial analyst at a small regional company will have an average salary (there are exceptions, of course). But as a rule, an experienced financial analyst at a large corporation or a fast-growing, promising company earns more than decent.

At the same time in the first years it is not necessary to chase fees. It is better to devote this time to building a good portfolio of projects so as to qualify for higher-paying positions later.

Take a look at financial analyst job positions and salaries.

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