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What are the Responsibilities of a Financial Analyst?

Hey there! Welcome back again. Wondering what does a Financial Analyst do? Here’s a complete guide on the scope of work, types of employment, and the difference between a Business Analyst and a Financial Analyst. Let us quickly get started.

A Financial Analyst is significantly involved and responsible for a wide range of activities, right from gathering data to organizing data and analyzing historical results. This exercise is conducted for making forecasts and projections, and thus, suggesting recommendations or corrective measures. This can be done by generating Excel models, presentations, and reports.  

In simple words, a Financial Analyst must study and analyse economic and financial data in-depth and then make recommendations based on their analysis. Financial Analyst needs to research more about macro-economic and micro-economic data along with financials, and thereby estimate the prospects of businesses or industry in general.

Let Us Now Understand the Scope of Work:

  • The majority of financial analysts deal with investments. They advise their employer or their clients about where to deploy funds for maximum returns.
  • The investment could be in stocks or other instruments such as commodity markets, currency, or even real estate.
  • This is also called the buy-side function. On the other hand, an analyst in a sell-side function would evaluate stocks and securities and prepare research reports with a recommendation to buy, sell, or hold stocks or securities.
  • One of the positions that are considered very prestigious for a Financial Analyst is working in an investment bank.
  • Here, an analyst helps the bank in pricing its investment products. Analysts also work for merger and acquisition projects and play a major role in studying corporates’ fundamentals to determine the feasibility of the said merger or acquisition.
  • For this, they may prepare financial models and at the same time, make use of different forecasting tools. They may also be required to study venture capital opportunities for their clients and advice on the prospects of the business that is seeking venture capital.
  • An analyst also prepares financial models to estimate future economic trends and financial parameters of business entities.
  • They are also required to keep track of prevailing laws and regulatory frameworks for different types of industries.

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The Different Types of Employment Are as Follows:

  • Financial Analysts are mostly employed with stockbroking houses, mutual funds, pension funds, hedge funds, and insurance companies.
  • Those who advise on stocks and securities are called equity analysts and are much sought after not just by broking houses but also by mutual and pension fund companies.
  • Financial Analysts are also employed by NBFCs (Non-Banking Finance Companies), where commercial lending takes place.
  • They carry out balance sheet analysis and study audited financial statements to assess lending risk.
  • From company financial statements, they study prices, costs, expenses, tax rates, etc to determine a company’s future earnings and thereby determine its valuation. Financial Analysts may also examine the managerial effectiveness of business entities.
  • A good financial or equity analyst can bring windfall gains for the employer or the client, through good research and financial modeling.
  • Thus, an analyst’s job is often high paying, particularly the element of variable pay or bonus which is directly linked to the monetary gains made by the employer. 
  • Industries are always in need of good Financial Analysts who can improve the company’s position financially.

One of the most frequently asked questions that we get is what is the major difference between a Business Analyst and a Financial Analyst? 
One of the major differences between these two is, that Financial Analysts deal with more investments and the financial aspects whereas a Business Analyst is significantly involved with the operations and the management part.

What are the Different Types of Financial Analysts

There are Different Types of Financial Analysts too Which are Mentioned Below:

  1. Investment banking analyst
  2. Treasury analyst
  3. Equity research analyst
  4. Financial planning and analysis analyst
  5. Private equity analyst
  6. Corporate development analyst

There are Other Day-To-Day Responsibilities as Well that financial analysts Undertake:

  • Evaluating current capital expenditures and depreciation
  • Establishing and evaluating various profit plans
  • Coordinating with other members of the finance team to review financial information

Did you know that technology plays a very big role in the lives and careers of Financial Analysts today? All Financial Analysts and;those aspiring to be Financial Analysts must understand ERP systems (Enterprise resource planning). Developing these technical skills can help you set apart as companies are stressing the importance of data-driven decisions over intuition-driven decisions. 

If you wish to be an expert, then you must enroll for the CFA course.

EduPristine is known for its successful journey of helping professionals attain this edge by training them for passing these exams. It has successfully trained nearly 15000+ financial professionals towards achieving their goals. To know more about the CFA course detailsand CFA course fees , please feel free to contact our counsellors, who would be more than happy to assist you. All the best and happy learning!

CFA Program (Chartered Financial Analyst)