FIN 320 Project One Financial Analyst Job Aid

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Finance

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Jan 9, 2024

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FIN 320 Project One Financial Analyst Job Aid Financial Responsibilities [In this section, describe the responsibilities of a financial analyst. Write five to seven bullet points outlining the responsibilities a financial analyst has. Use complete sentences.] Analyze past financial statements, review statements to detect any possible fraud. Suggest areas of improvement to make financial decisions. Research and report financial information to financial managers within the firm. Review and determine appropriate actions regarding the income statement, cash flow statement and the balance sheet. Review and suggest capital budgeting measures for future company projects. Make suggestions for the company to decrease any unnecessary costs being incurred by the firm. Financial Management Decisions Financial decisions that are made is what keeps the firm from becoming a failed business. If financial decisions are not evaluated, the firm would not be able to make appropriate decisions regarding the best possible outcome. Profit must continually increase as the economy fluctuates. Managing finances allows for the firm to know their worth in assets and liquidity. It also allows for the firm to know their short- and long-term debts. Financial decisions also need to be made to decrease any futures risks for the firm. Management would not be able to ensure the financial health of the company. Financial reports would not be available to employees, investors or shareholders. The firm would not be able to react to economic trends and create future growth. Accounting Principles Financial analysts should utilize the Generally Accepted Accounting Principle (GAAP). United States law requires businesses to release their financial statements to the public and to company’s who trade publicly to continue to be allowed to trade on the stock exchange. If information within the financial statements were not accurate the company/ firm could incur fines. Incorrect financial information could cause investors and shareholders to withdraw their investments which would cause the company assets to decrease and could ultimately cause the company to go bankrupt. Financial Statements Financial analysts can utilize the income statement, balance sheet and the cash flow statement to create the information they need to inform the firm and investors with the information they need to ensure the firms success. The income statement will show revenues and expenses incurred by the firm. The balance sheet contains a summary of the firm’s assets. It also summarizes the firm’s current financial standing. The cash flow statement shows the cash received and spent by the firm quarterly and yearly. These three
reports will allow for business decisions to be made appropriately allowing for investors to continue to invest and for hopeful investors that would like to invest within the firm allowing for financial growth. Analysts should utilize these reports to know if stock is at an appropriate value. If this information was not available to investors, investors may not consider investing within the firm. It could also make currents investors want to withdraw their investments. Financial Terminology Financial statement o Definition: Provides a visual representation of the firm that is used to describe the business to investors and others outside of the firm, as well as the firm’s employees. There are four types of financial statements: Income Statement, Balance Sheet, Cash Flow Statement, Statement of Shareholder’s Equity. o How this is used: Investors, stakeholders and financial analysts utilize the financial statements to report and make financial decisions. This also allows for the financial health of the firm to be evaluated. Liquidity o Definition: The speed at which an asset can be converted into cash without the loss of value. o How this is used: Liquidity allows the firm to convert assets into cash to pay liability and short-term debts. A company can sell an asset to free cash and pay for a debt. Working capital o Definition: The capital of a firm which is used in its day-to-day trading operations, calculated as the current assets minus the current liabilities. o How this is used: This measures the shorts term health of a firm, allowing for the firm to continue moving forward in its operations. Capital allows for a firm to purchase necessary inventory, vendors and payroll. Diversification o Definition: The reduction in risk that comes about by combining two or more risky assets into a portfolio where the individual assets are less than perfectly positively correlated. o How this is used: This allows for unsystematic risk to be decreased or eliminated. Time value of money o Definition: The concept that money is worth more now that in the future. The same sum of money today is worth more than a year from now. o How this is used: To make health investment choices for the firm. The firm should always choose options which will create a higher return for the company. Investing money into assets that can create a higher profit. References
Financial Analysis . (2018). Inc.com; Inc. https://www.inc.com/encyclopedia/financial- analysis.html Matos, L. (2019, April 11). The Comprehensive Guide to Understanding GAAP | Accounting.com . Accounting.com; Accounting.com. https://www.accounting.com/resources/gaap/ What Does a Financial Analyst Do? | Accounting.com . (2021, October 26). Www.accounting.com. https://www.accounting.com/careers/financial- analyst/#:~:text=They%20use%20reports%20issued%20by Titman, S., Keown, A.J., & Martin, J.D. (2018). Financial Management: Principles and Applications (13 th ed.) Upper Saddle River, NJ: Prentice Hall
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