FIN 320 Project One Financial Analyst Job Aid - R.Vasquez (1)

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Southern New Hampshire University *

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Jan 9, 2024

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FIN 320 Project One Financial Analyst Job Aid The goal of this job aid is to provide an overview of the daily responsibilities of a financial analyst and to describe the role financial management plays in an organization. Financial Responsibilities ● Close attention to detail and excellent communication skills. ● Financial analysts are responsible for keeping track of a company’s financial plan by analyzing the company’s performance (CFI, 2022). ● Analysts create and maintain various spreadsheets and dashboards to aid in their analysis and insight provision. They might also create models to value potential investment opportunities (CFI, 2022). ● Perform market research, data mining, and business intelligence. ● Forecast future revenues and expenditures to establish cost structures and determine capital budgeting for projects. ● Analyze past and present financial data of the organization to predict the return on investment for different stocks and business ventures (LHH, 2022). ● Work with CFOs and other team members to set company investment direction and policies. ● Analyzes past results, performs variance analyses, identifies trends, and recommends improvement (LHH, 2022). ● Develops automated reporting/forecasting tools to increase productivity. ● Analyzes data to create financial models to support financial decisions (CFI, 2022). Financial Management Decisions Financial knowledge is essential for all businesses. A financial responsibility, monitoring, planning, and budgeting are critical for success. One of the most important responsibilities undertaken by businesses is financial management. Financial managers must consider potential consequences of management decisions on profits, cash flows, and the company’s financial condition. Every aspect of a business influences a company’s financial performance. Financial analysts work to evaluate and control these influences (Woodruff, 2019). Accounting Principles Generally Accepted Accounting Principles (GAAP) are a set of accounting principles, standards, and procedures that are issued by FASB (Financial Accounting Standard Board). It is important to know that every company should follow these principles. GAAP aims to add and improve clarity and consistency in the communication of financial information. The ultimate goal is to ensure a company’s financial statements be complete, consistent, and comparable. This is done using the 10 key concepts for the

Principles of GAAP: the principles of regularity, consistency, sincerity, permanence of methods, non- compensation, prudence, continuity, periodicity, materiality, and utmost good faith. Other basic principles such as cost principle, time period assumption, and going concern principle help investors and third parties make decisions on the company’s financial information they receive. If decisions were made with no regard to the principles above, such as the principle of consistency and continuity, it would be hard to decipher what the company truly means and what direction the company is headed in. Without following these principle, it would be very easy for a company to fail (Fernando, 2022). Financial Statements There are many financial statements utilized to help businesses make decisions. Some of the most used statements are balance sheets, income statements, and cash flow statements. Balance sheets are a summary of a company’s financial balances and depicts the strength of a company. Income statements are also known as profit and loss statements. These reflect a company’s revenue and expenses during a particular time period. Its purpose is to show how a company has performed through listing sales, expenses, and resulting profit and loss. Cash flow statements show inflows and outflows of cash during a specific time period. These statements are important indicators of whether a company can generate sufficient revenue to maintain a healthy business. Financial Terminology ● Financial statement o Definition: Financial statements are written records that convey the business activities and financial performance of the company (Murphy, 2022). o How this is used: Financial statements are used by investors, market analysts, and creditors to evaluate a company’s financial health and earnings potential. The three major financial statement reports are the balance sheet, income statement, and the cash flow statement. ● Liquidity o Definition: The speed at which an asset can be converted into cash without loss of value (Titman et al., 2018). o How this is used: Financial analysts use liquidity to see if the company’s liquid assets are able to cover their short-term obligations. ● Working capital o Definition: The difference between a company’s current assets and inventories of raw materials and finished goods, and its current liabilities (Fernando, 2022). o How this is used: Working capital is necessary for a company to remain financially sound. Businesses cannot rely on accounting profits to pay its bills and must rely on their working capital to fulfill their liabilities.

● Diversification o Definition: A risk management strategy that mixes a wide variety of investments within a portfolio (Segal, 2022) o How this is used: Financial analysts can diversify portfolios to leverage their risk. Aggressive investors can split their investments between multiple funds to limit risk and increase the potential reward. ● Time value of money o Definition: A concept that money you have now is worth more than money tomorrow. That is because money today can be used, invested, or grown. (Heyford, 2022). o How this is used: Time value of money is an integral part of financial planning and risk management activities. It is one of the most popular and influential methods for valuing investment opportunities. References Fernando, J. (2022, November 3). Working Capital: Formula, components, and limitations . Investopedia. Retrieved January 22, 2023, from https://www.investopedia.com/terms/w/workingcapital.asp Fernando, J. (2022, December 19). GAAP: Understanding it and the 10 key principles . Investopedia. Retrieved January 22, 2023, from https://www.investopedia.com/terms/g/gaap.asp Financial analyst job description . Corporate Finance Institute. (2022, November 28). Retrieved January 22, 2023, from https://corporatefinanceinstitute.com/resources/career/financial-analyst- job-description/ Heyford, S. C. (2022, December 19). Understanding the time value of money . Investopedia. Retrieved January 22, 2023, from https://www.investopedia.com/articles/03/082703.asp#:~:text=Time%20value%20of%20money %20is%20the%20concept%20that%20money%20today,unrealized%20gains%2C%20or %20unrealized%20losses. LHH. (2022, February 3). Financial analyst job description . LHH. Retrieved January 22, 2023, from https://www.lhh.com/us/en/insights/job-descriptions/financial-analyst/ Murphy, C. B. (2022, December 19). Financial statements: List of types and how to read them . Investopedia. Retrieved January 22, 2023, from https://www.investopedia.com/terms/f/financial- statements.asp Segal, T. (2022, September 15). What is diversification? definition as investing strategy . Investopedia. Retrieved January 22, 2023, from https://www.investopedia.com/terms/d/diversification.asp Titman, S., Keown, A. J., & Martin, J. D. (2018). Financial management: Principles and applications

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(13th ed.). Pearson. Woodruff, J. (2019, January 28). Why is financial management so important in business? Small Business - Chron.com. Retrieved January 22, 2023, from https://smallbusiness.chron.com/financial-management-important-business-57073.html