Role Of Financial Analyst List Of Top 12 Roles Responsiblities

What is the Role of a Financial Analyst?

Below is the list of the Top 12 roles and responsibilities of Financial Analysts –

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#1 – Financial Planning & Analysis (FP&A)

FP&A Analysts perform the tasks of budgeting, forecasting, and analytical work to support the business strategy and monitor the organization’s financial health. Following are their roles –

Analyze the company’s financial data and identify trends, considering the company’s goals and financial standing.Analyze actual results vs. budgeted/forecasted, identify the gaps, and report them to management.Support the team in budgetingBudgetingBudgeting is a method used by businesses to make precise projections of revenues and expenditure for a future specific period of time while taking into account various internal and external factors prevailing at that time.read more and suggest improvements based on the analytical information available with the analyst.Evaluate the capital and revenue budgets; Analyze the working capitalWorking CapitalWorking capital is the amount available to a company for day-to-day expenses. It’s a measure of a company’s liquidity, efficiency, and financial health, and it’s calculated using a simple formula: “current assets (accounts receivables, cash, inventories of unfinished goods and raw materials) MINUS current liabilities (accounts payable, debt due in one year)“read more and cash flow position of the business; ProfitabilityProfitabilityProfitability refers to a company’s ability to generate revenue and maximize profit above its expenditure and operational costs. It is measured using specific ratios such as gross profit margin, EBITDA, and net profit margin. It aids investors in analyzing the company’s performance.read more improvement; Process Improvement; Cost-benefit analysisCost-benefit AnalysisCost-benefit analysis is the technique used by the companies to arrive at a critical decision after working out the potential returns of a particular action and considering its overall costs. Some of these models include Net Present Value, Benefit-Cost Ratio etc.read more and cost-cutting initiatives.Variance AnalysisVariance AnalysisVariance analysis is the process of identifying and analyzing the difference between the standard numbers that a company expects to accomplish and the actual numbers that they achieve, in order to help the firm analyze positive or negative consequences.read more of current and past financial information; Performs financial forecasting, keeps the management informed, and helps them make the right decisions. Develop financial models to forecast the outcomes of certain business decisions. Analyze the business process and financial performance, conduct benchmarking, and develop forecast models.Track Operational metrics regularly and provide suitable business recommendations to the management.

#2 – Due Diligence

Analysts perform due diligence for business partnering by examining their financial performance and position.

In the case of Mergers & Acquisitions, they play a crucial role by performing due diligence.Analysts employed by banks do due diligence before granting loans. They examine all the financial data before concluding whether the client is good to give credit.

#3 – Treasury

Analysts who work in the treasury department take care of the following –

Cash managementCash ManagementCash Management refers to the appropriate collection, handling, & disbursement of cash for ensuring financial stability & avoiding insolvency risk. read moreTreasury operationsLiquidity Planning and controlLooking for investment opportunitiesTake care of all banking transactionsdeals with foreign currency settlementCorporate FinanceManagement of interestcurrency and commodity risks

#4 – Financial Reporting

#5 – Investment Banking

A Financial Analyst at Investment bankingInvestment BankingInvestment banking is a specialized banking stream that facilitates the business entities, government and other organizations in generating capital through debts and equity, reorganization, mergers and acquisition, etc.read more does industry-specific research and analysis.They build financial valuation models and track financial trends.They prepare research reports, status reports, presentations, briefing books, and pitching books for initial public offeringInitial Public OfferingAn initial public offering (IPO) occurs when a private company makes its shares available to the general public for the first time. IPO is a means of raising capital for companies by allowing them to trade their shares on the stock exchange.read more (IPO).Knowledge of investment risk and security analysisSecurity AnalysisSecurity analysis is the process of interpreting the value of financial instruments such as stocks, bonds, debts, warrants, and other securities of a company to ensure that the investors are investing through publicly available information. The three related methods include fundamental, technical, and quantitative approaches.read more.Experience in statistics, quantitative analysis, and data modeling.

#6 – Commercial Banking (CB)

In commercial bankingCommercial BankingA commercial bank refers to a financial institution that provides various financial solutions to the individual customers or small business clients. It facilitates bank deposits, locker service, loans, checking accounts, and different financial products like savings accounts, bank overdrafts, and certificates of deposits.read more, Financial analysts will work with credit products like term loans, the revolving facility of creditRevolving Facility Of CreditA revolving credit facility refers to a pre-approved loan facility provided by banks to their corporate clients. It states that the companies are free to borrow funds from these financial institutions to fulfill their cash flow needs by paying off the underlying commitment fees.read more, syndicated facilities, funding for working capital, product loans, and other fixed-income products.Evaluate the creditworthinessCreditworthinessCreditworthiness is a measure of judging the loan repayment history of borrowers to ascertain their worth as a debtor who should be extended a future credit or not. For instance, a defaulter’s creditworthiness is not very promising, so the lenders may avoid such a debtor out of the fear of losing their money. Creditworthiness applies to people, sovereign states, securities, and other entities whereby the creditors will analyze your creditworthiness before getting a new loan.read more of the business ventures and determine their ability to repay credits/loans taken from the bank.Analyze the client’s financial statementsFinancial StatementsFinancial statements are written reports prepared by a company’s management to present the company’s financial affairs over a given period (quarter, six monthly or yearly). These statements, which include the Balance Sheet, Income Statement, Cash Flows, and Shareholders Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure uniformity in reporting at all levels.read more, financial performance, position, industry, and management team. The inputs are used to decide whether the client can be provided credit or not.

#7 – Portfolio Management

Portfolio analysts help their clients to buy or sell investments.They conduct detailed portfolio analysisPortfolio AnalysisPortfolio analysis is one of the areas of investment management that enables market participants to analyze and assess the performance of a portfolio to measure performance on a relative and absolute basis along with its associated risks.read more and prepare reports based on that. They analyze and compare different industries, past financial trends, financial metrics, and other legal restrictions.

#8 – Corporate Development

Corporate development analyst works predominantly on the following –

Mergers & acquisitionsImproving divestituresDivestituresDivesting refers to the act of partially or entirely selling organizational assets to generate funds urgently.read more and management of the business riskBusiness RiskBusiness risk is associated with running a business. The risk can be higher or lower from time to time. But it will be there as long as you run a business or want to operate and expand.read moreCapital fund-raisingExploring new markets for the business, products, and customersIdentifying new opportunitiesWork towards the company’s vision, mission, and strategy.

#9 – Transaction Advisory

Transaction advisory analyst deals with the transaction side of the business and predominantly covers advisory for mergers and acquisitions, diligence service, valuation services, debt restructuringDebt RestructuringDebt restructuring is a refinancing process whereby the company facing cash flow issues arranges with lenders to renegotiate favourable or flexible terms, saving themselves from bankruptcy. The lenders may choose to lower the business rate or increase the time limit for paying the interest and principal amount.read more services, etc.The analyst provides services to a business entity for the transaction. For example, due diligence if the transaction is a mergerMergerMerger refers to a strategic process whereby two or more companies mutually form a new single legal venture. For example, in 2015, ketchup maker H.J. Heinz Co and Kraft Foods Group Inc merged their business to become Kraft Heinz Company, a leading global food and beverage firm.read more or acquisition of a companyAcquisition Of A CompanyAcquisition refers to the strategic move of one company buying another company by acquiring major stakes of the firm. Usually, companies acquire an existing business to share its customer base, operations and market presence. It is one of the popular ways of business expansion.read more.

#10 – Valuation

Valuation analysts analyze a business, equity, commodity; asset; real estate, etc., and estimate an approximate value based on the valuation techniques. They develop financial models in excelFinancial Models In ExcelFinancial modeling in Excel refers to a tool used for preparing the expected financial statements predicting the company’s financial performance in a future period using the assumptions and historical performance information.read more for valuation.They assist in developing proposals and presentations for clients.

#11 – Equity Research

Equity research analystEquity Research AnalystAn equity research analyst is a qualified professional who interprets financial information and trends of an organization or industry to provide recommendations, opinions, reports, and projections on the corporate stocks to facilitate equity trading.read more does financial research and analysis of a company’s performance, forecasting the financial statements, deriving a valuation for the company, and providing recommendations to investors for their investment plan.They do a quantitative and qualitative analysis of equity’s statistical data concerning the market and economic conditions.They analyze the stocks and help the investors to make better investment decisions. They recommend whether to “Buy,” “Hold,” or to “Sell” equity supported with proper analysis and theory.

#12 – Private Equity (PE)

Private Equity analystPrivate Equity AnalystA private equity analyst is an analyst who looks for undervalued companies for a private equity investor to buy, take them private and earn profits. The companies are primarily unlisted, and the risk is higher.read more does research and analysis of private companies. Financial ModelingFinancial ModelingFinancial modeling refers to the use of excel-based models to reflect a company’s projected financial performance. Such models represent the financial situation by taking into account risks and future assumptions, which are critical for making significant decisions in the future, such as raising capital or valuing a business, and interpreting their impact.read more techniques are used to determine the pros and cons of investing in private companies.PE Analysts work with PE firms, and they manage the investment funds and portfolio of private companies.Analysts provide input for acquisition opportunities and strategic growth of the business.They analyze the best investment mix and opportunities that give the highest Return of Investment (ROI).

What is the Role of a Financial Analyst?#

#1 – Financial Planning & Analysis (FP&A)#

#2 – Due Diligence#

#3 – Treasury#

#4 – Financial Reporting#

#5 – Investment Banking#

#6 – Commercial Banking (CB)#

#7 – Portfolio Management#

#8 – Corporate Development#

#9 – Transaction Advisory#

#10 – Valuation#

#11 – Equity Research#

#12 – Private Equity (PE)#

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