Financial analysts analyze the financial situation of companies and recommend ways for these companies to manage, spend, and invest their money. The goal of financial analysts is to help their employer or clients make informed, lucrative financial decisions. They assemble and evaluate the company’s financial data and assess investment opportunities. They look at the company’s financial history, the direction that company wants to take in the future, the company’s place in the industry, and current and projected economic conditions. Financial analysts also conduct similar research on companies that might become investment opportunities. They write reports and compile spreadsheets that show the benefits of certain investments or selling certain securities.
Among the businesses employing financial analysts are banks, brokerage firms, government agencies, mutual funds, and insurance and investment companies. There are approximately 197,000 financial analysts employed in the United States.
Financial Analysts Job Description
Financial analysts are sometimes called investment analysts or security analysts. The specific types, direction, and scope of analyses performed by financial analysts are many and varied, depending on the industry, the employer or client, and the analyst’s training and years of experience. Financial analysts study their employer’s or client’s financial status and make financial and investment recommendations. To arrive at these recommendations, financial analysts examine the employer’s or client’s financial history and objectives, income and expenditures, risk tolerance, and current investments. Once they understand the employer’s or client’s financial standing and investment goals, financial analysts scout out potential investment opportunities. They research other companies, perhaps in a single industry, that their employer or client may want to invest in. This in-depth research consists of investigating the business of each company, including history, past and potential earnings, and products. Based on their findings, financial analysts may recommend that their employer or client buy stock in these companies. If the employer or client already holds stock in a particular company, financial analysts’ research may indicate that stocks should be held or sold, or that more should be purchased.
Financial analysts work for companies in any number of industries, including banking, transportation, health care, technology, telecommunications, and energy. While investment options and concerns differ among these, financial analysts still apply the same basic analytic tools in devising investment strategies. They try to learn everything they can about the industry they are working in. They study the markets and make industry comparisons. They also research past performance and future trends of bonds and other investments.
Financial analysts compile many types of reports on their employer or client and on investment opportunities, such as profit-and-loss statements and quarterly outlook statements. They help to develop budgets, analyze and oversee cash flow, and perform cost-benefit analyses. They conduct risk analyses to determine what the employer or client can risk at a given time and/or in future. Another responsibility is to ensure that their employer or client meets any relevant tax or regulatory requirements. Financial analysts compile their work using various software programs, often developing financial models, such as charts or graphs, to display their data.
Companies that want to go public (sell company shares to individual investors for the first time) often ask financial analysts to make projections of future earnings as well as presentations for potential investors. Financial analysts also make sure that all paperwork is in order and compliant with Securities and Exchange Commission rules and regulations.
Entry-level financial analysts, usually working under direct supervision, mainly conduct research and compile statistical data. After a few years of experience, they become more involved in presenting reports. While a financial analyst generally offers recommendations, a senior financial analyst often has the authority to actually decide purchases or sales. Senior financial analysts implement a company’s business plan. In larger companies, they also assist different departments in conducting their own financial analyses and business planning. Those in senior positions become supervisors as well, training junior financial analysts.
Many specialties fall under the job title of financial analyst. These specialties vary from employer to employer, and duties overlap between different types of analysts. In smaller firms a financial analyst may have extensive responsibility, while at larger firms a financial analyst may specialize in one of any number of areas. Budget analysts, often accountants or controllers, look at the operating costs of a company or its individual departments and prepare budget reports. Credit analysts examine credit records to determine the potential risk in extending credit or lending money. Investment analysts evaluate investment data so they can make suitable investment recommendations. Mergers and acquisitions analysts conduct research and make recommendations relating to company mergers and acquisitions. Money market analysts assess financial data and investment opportunities, giving advice specifically in the area of money markets. Ratings analysts explore a company’s financial situation to determine whether or not it will be able to repay debts. Risk analysts focus on evaluating the risks of investments. The intent is to identify and then minimize a company’s risks and losses. Security analysts specialize in studying securities, such as stocks and bonds. Tax analysts prepare, file, and examine federal, state, and local tax payments and returns for their employer or client and perhaps also for local affiliates. They analyze tax issues and keep up with tax law changes. Treasury analysts manage their company’s or client’s daily cash position, prepare cash journal entries, initiate wire transfers, and perform bank reconciliations.
Analysts are considered either buy-side analysts, who usually work for money management firms, or sell-side analysts, sometimes called sales analysts or Wall Street analysts, who usually work for brokerage firms.
Personal financial advisers have many similar responsibilities (assessing finances, projecting income, recommending investments), but these are performed on behalf of individuals rather than companies.
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