Are you seeking a career where you get to keep your finger on the pulse of “big picture” trends? If so, a career as a financial analyst might be just the thing for you. This kind of role is perfect for anyone who takes tons of data in, figures out its narrative, and then makes a bunch of decisions for a company regarding how best to spend its investment dollars.
To embark on this journey, understanding the eligibility for CFA and when to begin your preparation can help you take the first step toward a fulfilling financial career.
Table of Contents:
What is a Financial Analyst?
The duties related to the position of a Financial Analyst are assessing financial data, following through current trends and events, analyzing one company’s financials, and establishing financial models to make predictions about its performance in the future. What is a Financial Analyst, depends on the particular post, they may be on a larger macroeconomic monitoring scheme or focus specifically on sectors or industries.
These roles require data along with solid mathematical and analytical skills. The reason companies look for valuable financial analysts is usually to lead huge conglomerates like investment banks, insurance companies, mutual funds, hedge funds, pension funds, cash funds, or many securities firms, investment firms, private equity groups, venture capital firms, and government agencies.
What does a Financial Analyst do?
For an analyst of finance, answering the question What does a Financial Analyst do is all about making money possible for organizations through investing in specific products such as stocks and bonds. They monitor sources of information and analyze global, national, and regional economic trends to ensure the most profitable investment. A finance analyst should be knowledgeable in current events as well as macroeconomics, knowing how fiscal, monetary, and political trends affect markets as well as individual companies.
Both sell and buy-side analysts answer What does a Financial Analyst do, by doing a comprehensive bottom-up financial analysis of a firm in order to build financial models to drive their investment decisions. These professionals tend to specialize in equity markets or credit markets while research analysts also perform credit and equity analyses. They tend to recommend investments using the data they analyze, while research analysts are in a larger, broader, more exploratory data collection and interpretation process.
Financial Analyst Job Description
Financial analysts perform significant duties on either side – buy side or sell side depending on their organization, industry, and seniority. So read ahead to learn more details of financial analyst job description:
Collecting Data and Information
The first step relevant to financial analysis is gathering useful data and information. This includes historical financial report analysis, accounting numbers from the general ledger, stock price information, overall statistics and macroeconomic data, industrial research, and practically any other quantitative data source. This data is sourced from the internal databases of the company, third-party providers such as Bloomberg or Capital IQ, and government agencies like the Securities and Exchange Commission (SEC).
Information Collating
Usually, after data gathering, it is entered into Excel or some database. The next thing is to organize and clean it up for easy interpretation. Usually, it means arranging or sorting numbers and adding functions and formulas to get a common formatting style to be read and understood easily.
Analyzing Financial Results
Presently, after cleaning all the data and organizing it in Excel, the time has come for the financial analyst to go forth and perform an analysis of historical information and historical results. Historically, this has meant examining ratios and metrics such as gross margin, net margin, fixed vs. variable costs, year-over-year (YoY) growth rates, return on equity (ROE), return on assets (ROA), debt/equity ratio, earnings per share (EPS), and many others. The analyst examines trends as well as benchmark data against competitors in the same industry.
Make predictions and projections
It is time to make observations and forecasts about the future performance of the company after analyzing the historical information. There is science as well as art in predicting how the company will perform, and one has to make a lot of assumptions and leaps of faith to do so. Regression analysis, year-on-year growth rates, as well as bottom-up and top-down approaches are some common methods of forecasting.
Formulate Suggestions
A good financial analyst is not just a number cruncher but someone producing insights and recommendations on improving operations. Good observations include ways of cost-saving, revenue enhancing, market-share increasing, operational efficiency, customer satisfaction, and many more ways. These recommendations will be given to the CEO, the CFO, and other executives, and/or to the board of directors. This is what differentiates a world-class financial analyst from the ordinary.
Building Financial Models In Excel
Another important aspect of an analyst’s work in each of the functions or domains of corporate development, investment banking, equity research, FP&A, or any corporate finance function is financial modeling. Linkage of three financial statements is usually the first step toward creating more complex financial models, which include internal planning models, discounted cash flow analysis (DCF), or even more obscure models such as LBO and M&A models.
Create Presentations
The analysis done in Excel now needs to be converted into charts and graphs, which can be put into pitch books and management presentations.
Create Reports
This is an analyst’s life – work with internal reports and dashboards every day. They create internal dashboards about the key performance indicators (KPIs) and actual vs. budgeted reports. The business or client needs information presented, timely, simple to understand, accurate, and insightful to make informed decisions.
How to become a Financial Analyst?
A person’s schooling and early professional experiences can help them acquire several basic abilities for a Financial Analyst role. A bachelor’s degree in accounting, finance, business administration, or a similar discipline like statistics, economics, or general business is often required for entry-level financial analyst positions. Although a degree will probably make you a more competitive candidate, in some circumstances you might be able to replace a formal degree with several years of relevant experience. Other than this, you can opt to do certification courses like CFA, CMA, and FMVA, and to learn more explore the expert-led courses offered by edZeb and take the first step toward your professional growth.
Senior financial analyst roles often place more of a focus on dealing with corporate management, interacting directly with high-ranking client contacts, and creating marketing strategies to advertise financial analyst services to prospective new clients. Therefore, a successful profession requires experience showcasing effective communication abilities to build customer connections with corporate leaders. Additionally, demonstrating one’s capacity for strategic thinking on behalf of clients might increase one’s prospects of moving up the corporate ladder and into a more senior position. So, this is exactly how to become a Financial Analyst, if you are passionate about analyzing data, understanding market trends, and making informed decisions to drive investment strategies.
Skills for a Financial Analyst
To succeed as a financial analyst, one must develop a mixture of thinking and analysis independent of technological advancement and interpersonal skills. Starting from high school or college helps establish those roots in critical thinking, analysis of data, and communication.
Knowing tools such as Microsoft Excel, modeling innovative finance, and exploring other statistical software like Tableau, Power BI, or SQL would make you one step ahead. Learning principles of accounting, financial statements, and trends in the market is equally important, and is often present in undergraduate programs like finance, economics, or business administration.
Additional skills for a financial analyst include attention to detail, problem-solving abilities, and ethical judgment can be exercised through internships and projects based on academic values. To have more practical and industry-shaped learning, one can enroll in a professional certification course such as CFA, CMA, or FMVA, which are a citation or reference of excellence in the financial sector. edZeb offers those skills to you through the guidance of experts in the programs developed to help you face the realities of working life.
Mastering financial modeling is critical for a successful career in finance , and understanding how CFA is related to financial modeling can significantly enhance your skill set.
Is a Financial Analyst career right for me?
The world of finance markets keeps growing and changing very fast. It is now becoming something most exciting for the aspiring financial analyst for the entry-level job. They are characterized mainly by a series of hundreds of hours spent building financial models and then updating them so that they could be sufficient for carrying on in-depth research and preparing client-facing work. Also, a Junior Analyst’s time is significant in developing expertise in a particular sector and industry.
However, regular activities for a senior financial analyst include supervision of junior team members, interpretation of the findings, and direct interaction with clients. They travel to meetings and presentations, depending on working either the buy side or the sell side. Such career advancements at this level may lead to one becoming a portfolio manager or fund manager analyst who oversees an investment portfolio or even head positions in investment banking.
If so, then the above profession is probably the best for you, as it thrives on analyzing and producing insights leading to making high-value financial decisions.
To know more about compensation, read our blog on CFA salary in India, which outlines earning potential at every stage.
The Bottom Line
It is a profession that offers one, at least, the most perfect blend of analytical rigor and strategic decision-making. Whether it is helping develop an understanding of market trends, enjoying diving into financials, or seeking the influence of high-value investments career is really exciting and has endless opportunities for growth and learning. The right skills, education, and certifications of which one may obtain from programs such as those offered at edZeb-can prepare you for the rich endeavors in this ever-changing and rewarding space.
FAQ’s
Is it hard to become a Financial Analyst?
Becoming a financial analyst is not easy. One needs very strong quantitative skills, excellent analytical abilities, a deep sense of financial concepts, and proficiency in data analysis tools. It is often a competitive market for jobs, particularly at the top of that industry but with dedication and the right education, anything is possible.
Is it worth becoming a Financial Analyst?
Indeed, financial analyst is a rewarding designation when considering promising job prospects, salary rates, and career advancement opportunities.
Does a Financial Analyst have a future?
A financial analyst assesses economic data and analyzes trends and models of both the investment as well as company activities. Analysts give insights into the profitability of companies, predict the future performance of the latter, as well as offer recommendations on strategies to be employed to optimize the financial outcome for organizations or clients.
Can AI replace a Financial Advisor?
Although AI may help financial advisers by automating data analysis, managing portfolios, and offering insights, it is devoid of emotional intelligence and a customized comprehension of each client's particular objectives and situation. Even if AI increases productivity, human advisers are still essential for fostering trust and providing thoughtful advice on difficult financial issues.
