Introduction
The overall goal of the given job aid is to help a financial analyst with his or her daily responsibilities and provide general information about the position within the context of the organization.
Financial Responsibilities
- A financial analyst must be attentive to details and have outstanding communication skills.
- The position requires for analysis to conduct financial analysis through projections and modeling, such as valuation and cash flow assessments, on his or her own.
- An analyst needs to be able to prepare presentations to present to the managers in regard to budget reports.
- The position requires competence in assessing, analyzing, and understanding financial statements.
- A financial analysis needs to be competent at Excel to track costs and expenses.
Financial Management Decisions
It should be noted that financial data is critical for all business decisions. A manager is able to make sound and effective decisions only on the basis of how financial activities are directed, organized, prepared, and managed, which comprises financial management. Financial analysis and management are not only essential for business performance but also competitive advantage (Titman et al., 2018). Therefore, both major and minor business decisions need core financial information. Examples of such data include financial models, projections, budget reports, cash flow assessments, financial statements, and regular monitoring of expenses (Titman et al., 2018). The lack of such critical data can severely impair the company’s performance and lead to decisions that will have both short-term and long-term ramifications. It is also important to present the given mass of information succinctly and accurately in order to ensure that business decisions are effective.
Accounting Principles
When reporting and delivering financial information, one must adhere to the guidelines and rules, such as generally accepted accounting principles (GAAP). A company’s financial state can only be assessed through accurate accounting measures. For example, accounting reveals key data in operational efficiency, profitability, solvency, and liquidity, which reflect the overall financial health (Titman et al., 2018). The unavailability of such information or inaccurate analysis can lead to loss of business opportunities, unjustified expenses, poor risk management, and even bankruptcy.
Financial Statements
It is important for a financial analyst to know that financial statements are documents that contain data on the financial performance and business activities of a company. There are three types of financial statements, which include cash flow statements, income statements, and balance sheets. For example, the latter contains information about liabilities, assets, and shareholder’s equity (Titman et al., 2018). Income statements provide an overview of income and expenses over a specific period of time, on the basis of which, for example, managers can see where the expenses are excessive.
Financial Terminology
- Financial statements are written records of the core aspects of running a company, which include cash flow statements, income statements, and balance sheets.
- Liquidity is a financial factor that reflects how easily a company can turn a specific asset into usable cash without altering the price of the asset itself.
- Working capital is a highly important indicator of the short-term financial health of a company, which contains information on operational efficiency and liquidity. It directly assesses the differences between a business’s current liabilities and assets.
- Diversification is critical for risk management, where assets and other resources are distributed across less interlinked classes, sectors, or industries. It makes a business more resilient to industry-wide disturbances since the risk is minimized through diversification.
- Time value of money reflects the core notion of how the same amount of money now is not equivalent to its future worth. The main underlying concept is the presence of earning potential and opportunity costs.
Reference
Titman, S., Keown, A., & Martin, J. D. (2018). Financial management: Principles and applications (13th ed.). Pearson.