Financial analysis is the process of evaluating businesses to determine their performance.
Financial Analysis
Are you interested in learning the story behind numbers to help your organisation make informed business decisions? If yes, you need to acquire financial analysis skills to help you glean insights from a company’s financial information.
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Learn more about financial planning and analysis and how a financial analysis course can help you acquire the required skills.
What is Financial Analysis?
Financial analysis is the process of evaluating businesses to determine their performance. It is used to analyse whether a business or project is stable, liquid, solvent, or profitable enough to warrant a monetary investment. The process is also used to set financial policies and long-term plans for business activities.
Notably, financial analysis techniques involve the synthesis of financial numbers and data. Financial data is commonly analysed by calculating ratios from the data in financial statements to compare against those of other organisations or the company's historical performance.
Under vertical analysis, each financial statement component is compared as a percentage of a baseline. On the other hand, horizontal analysis compares one baseline year's financial results to other years.
Must have Skills in Financial Analysis
In order to be a successful financial analyst, it is important to know how to:
- Calculate key ratios that let you compare metrics across periods and organisations
- Communicate the story behind the financial data
- Create predictive models to forecast a company’s financial movement against the industry
- Compare your organisation’s performance to broader market and industry trends
- Derive actionable insights from financial data
- Understand financial statements that include the balance sheet, income statement, and the statement of cash flows
How to Acquire Financial Analysis Skills?
Financial analysis has a vital role to play when it comes to managing money and making informed investment decisions. Here are some practical tips that can help you get started:
- Before embarking on this journey, familiarise yourself with the basics or fundamental accounting principles like balance sheets and income and cash flow statements. Also, it is significant to learn about financial ratios and key metrics used in analysis.
- Enrolling in a comprehensive financial analysis course programme can help you build your financial analysis skills and knowledge. These specially designed courses include in-depth lessons on various topics, including financial modelling and data analysis. Also, they help better understand different financial analysis methods and tools. Besides, you will also get to participate in hands-on projects and exercises that will help you develop problem-solving abilities and refine your analytical skills.
- Talk to or work with other professionals to hone your financial analysis skills.
- It is crucial to apply your knowledge to real-world scenarios. Considering this, you can use actual financial statements to practice. This will help you identify trends and evaluate business performance.
Career Paths After Learning Financial Analysis
After mastering financial analysis skills, you can easily work as a financial analyst responsible for gathering and analysing financial data to predict future trends and investment performance. Also, financial analysts evaluate investment opportunities to make recommendations to investors.
Let’s dive deeper to understand what are the other career options available after learning financial analysis:
- Assess investment opportunities, make asset allocation recommendations and monitor investment performance as an asset and wealth management associate
- Evaluate stocks, bonds, and other securities as an equity research analyst
- Manage investment projects, assess their financial feasibility, and make recommendations to investors and stakeholders as a project finance manager
Conclusion
Financial analysis is important for making smarter, more strategic decisions based on a company’s financial health. Notably, different financial analysis techniques are used to explore trends, understand growth and seek areas of risk.
Further, possessing financial analysis skills can help you investigate financial statement changes, calculate financial ratios and explore operating variances without any hassle. If the domain of financial analysis interests you and you want to pursue a high-growth career in finance, then getting enrolled in a reputable course like Postgraduate Financial Analysis Program (PGFAP) is a good idea.
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