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Encyclopedia > Financial analyst

A financial analyst (or securities analyst, research analyst, equity analyst, investment analyst) works with financial analysis. Equity is a financial security used for financing business. It differs from debt in that it pays no set interest. It is a claim on future earnings. Financial analysis refers to an assessment of the viability, stability and profitability of a business, sub-business or project. ... This article does not cite any references or sources. ...

Contents

Job

An analyst will write reports on the companies they are supposed to cover, trying to describe the businesses and their opinion of the company's investment potential, usually from a fundamental analysis standpoint. They also summarize that report with a rating, such as "buy", "sell", "market perform", "overweight", "hold", etc. Fundamental analysis of a business involves analyzing its income statement, financial statements and health, its management and competitive advantages, and its competitors and markets. ...


The analysts get their information by studying public records of the company and by participating in public conference calls where they can ask direct questions to the management. Previously, analysts were said to obtain lots of information (especially from clients of their investment bank), via exclusive meetings with upper management. Regulation FD (Fair Disclosure), is said to prevent most of this from happening at present. A conference call is a telephone call where the calling party wants to have more than one called party listen in to the audio portion of the call. ... The Securities and Exchange Commissions Regulation Fair Disclosure, also commonly referred to as Regulation FD or Reg FD was an SEC ruling implemented in October 2000 ([1]). It mandated that all publicly traded companies must disclose material information to all investors at the same time. ...


Financial analysts, also called securities analysts and investment analysts, work for banks, insurance companies, mutual and pension funds, securities firms, and other businesses, helping these companies or their clients make investment decisions. Financial analysts employed in Commercial lending perform "balance sheet analysis," examining the audited financial statements and corollary data in order to assess lending risks. In a stock brokerage house or in an investment bank, they read company financial statements and analyze commodity prices, sales, costs, expenses, and tax rates in order to determine a company's value and project future earnings. In any of these various institutions, the analyst often meets with company officials to gain a better insight into a company's prospects and to determine the company's managerial effectiveness. Usually, financial analysts study an entire industry, assessing current trends in business practices, products, and industry competition. They must keep abreast of new regulations or policies that may affect the industry, as well as monitor the economy to determine its effect on earnings. This article needs additional references or sources for verification. ... Historical financial statement Financial statements (or financial reports) are formal records of a business financial activities. ...


Financial analysts use spreadsheet and statistical software packages to analyze financial data, spot trends, and develop forecasts. On the basis of their results, they write reports and make presentations, usually making recommendations to buy or sell a particular investment or security. Senior analysts may actually make the decision to buy or sell for the company or client if they are the ones responsible for managing the assets. Other analysts use the data to measure the financial risks associated with making a particular investment decision.


Financial analysts in investment banking departments of securities or banking firms often work in teams, analyzing the future prospects of companies that want to sell shares to the public for the first time. They also ensure that the forms and written materials necessary for compliance with Securities and Exchange Commission regulations are accurate and complete. They may make presentations to prospective investors about the merits of investing in the new company. Financial analysts also work in mergers and acquisitions departments, preparing analyses on the costs and benefits of a proposed merger or takeover. There are buy-side analysts and sell-side analysts. The phrase mergers and acquisitions (abbreviated M&A) refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling and combining of different companies that can aid, finance, or help a growing company in a given industry grow rapidly without having to create another business... Buy-side analysts work for money management firms such as mutual funds, pension funds, trusts, and hedge funds. ... A sell-side analyst works for a brokerage firm or an investment bank. ...


Some financial analysts, called ratings analysts (who are often employees of ratings agencies), evaluate the ability of companies or governments that issue bonds to repay their debt. On the basis of their evaluation, a management team assigns a rating to a company's or government's bonds. Other financial analysts perform budget, cost, and credit analysis as part of their responsibilities. A credit rating agency is a company that rates the ability of a person or company to pay back a loan. ...


Qualification

It is often required for analysts to earn a professional qualification such as Chartered Financial Analyst designation (CFA) in the United States of America, or an international qualification Certified International Investment Analyst designation (CIIA), to advance beyond a certain level within a firm. Many Chartered Accountants & MBAs have also entered this domain as consultants & investment bankers respectively. Chartered Financial Analyst (CFA) is a professional designation offered by the CFA Institute (formerly known as AIMR) to financial analysts who complete a series of three examinations and work for at least four years in the investment decision making process. ... Certified International Investment Analyst (CIIA) is a designation offered by the Association of Certified International Investment Analysts (ACIIA) to professional financial analysts; candidates may be financial analysts, portfolio managers and or investment advisors. ... CIIA may refer to the: Christmas Island Internet Administration Certified International Investment Analyst, (CIIA). ...


Skill

Most analysts will require basic analytical skills, and very good numerical skills. Importantly, communication skills are necessary to explain complex concepts to management or clients.


Controversies about financing

The research department sometimes doesn't have the ability to bring in enough money to be a self-sustaining research company.


The research analysts department is therefore sometimes a unit of an investment, investment brokerage, or investment advisory firm. Invest redirects here. ...


Since 2002 there has been extra effort to overcome perceived conflicts of interest between the investment part of the firm and the public and client research part of the firm (see accounting scandals). For example, research firms are sometimes separated into two categories, "brokerage" and "independent"; the independent researchers are not part of an investment firm and don't have the same incentive to issue overly favorable views on companies. Conflicts of Interest is an episode from the fourth season of the science-fiction television series Babylon 5. ... Accounting scandals, or corporate accounting scandals are political and business scandals which arise with the disclosure of misdeeds by trusted executives of large public corporations. ...


But that might not be sufficient to avoid all conflicts of interest. The debate is still about the way sell-side analysts are paid. Usually brokerage fees pay for their research. But this creates a temptation for analysts to act as stock sellers and to lure investors into "overtrading".


Some consider that it would be sounder if investors had to pay financial research separately and directly to fully independent research firms.


Scandals

The 2002 Wall Street scandal arose from perceived biased research analysis. See also the "global settlement" of late 2002. Accounting scandals, or corporate accounting scandals are political and business scandals which arise with the disclosure of misdeeds by trusted executives of large public corporations. ... The Global Settlement was a legal settlement reached to resolve issues of conflict of interest at brokerage firms. ...


Tad LaFountain, a Wells Fargo Securities analyst, dropped coverage of Altera (stock symbol: ALTR) because Altera executives informed him that they will no longer take his phone calls, allow him to ask questions about conference calls or give him any data, according to The New York Times. According to LaFountain, the company objected to his research -- more specifically, to his sell rating on Altera shares. The issue of analyst intimidation continues to dog the industry. Source: FierceFinance, The New York Times The New York Times is an internationally known daily newspaper published in New York City and distributed in the United States and many other nations worldwide. ...


See also

ICAI may stand for Institute of Chartered Accountants of India Institute of Chartered Accountants in Ireland Pontifical Comillas University of Madrid This is a disambiguation page: a list of articles associated with the same title. ... Institute of Chartered Financial Analysts of India (ICFAI University) [hereinafter referred to as the University] represents the multi-campus network of universities, sponsored by the Institute of Chartered Financial Analysts of India [hereinafter referred to as the Institute] in the states of Uttaranchal, Tripura, Sikkim, Meghalaya, Mizoram and Nagaland under... CIIA may refer to the: Christmas Island Internet Administration Certified International Investment Analyst, (CIIA). ... the French Society of Financial Analysts (SFAF) is a professional organisation, created in 1961 with the goal of representing members of the french financial profession. ... The European Federation of Financial Analysts Societies (EFFAS)[1] is the federation of analysts associations in Europe. ... The CFA Institute, headquartered in the USA at Charlottesville, Virginia and formerly known as the Association for Investment Management and Research (AIMR), awards the prestigious Chartered Financial Analyst(CFA) designation. ... The American Academy of Financial Management, or AAFM as it is known, is a professional association dedicated to the finance sector and finance professionals. ... Financial services is a term used to refer to the services provided by the finance industry. ... Research reports are business reports produced by business research firms (and commercial and investment banks) by their financial analysts. ... This article is being considered for deletion in accordance with Wikipedias deletion policy. ... // Investment Analysts Society of Southern Africa The Investment Analysts Society of Southern Africa (IAS) is a non-profit making body and was registered in 1968 as an association not for gain. ...

Further reading

  • Analysts: Oracles?, Kevin Ho, Columbia University, 2005.

External links

  • Estimate Future Earnings with Excel, An easy way to become your own analyst and forecast a company's likely future earnings yourself
  • [1]Daniel Scotto
  • [2] SFAF - the French Society of Financial Analysts
  • [3] ACIIA - Association of Certified International Investment Analysts
  • [4] EFFAS - European Federation of Financial Analysts Societies

  Results from FactBites:
 
Financial analysts and personal financial advisors (2595 words)
Financial analysts and personal financial advisors who have earned a professional designation are expected to have the best opportunities; competition is anticipated to be keen for highly lucrative positions in investment banking.
Financial advisors usually meet with established clients at least once a year to update them on potential investments and to determine whether the clients have been through any life changes—such as marriage, disability, or retirement—that might affect their financial goals.
Overall employment of financial analysts and personal financial advisors is expected to increase faster than average for all occupations through 2014, resulting from increased investment by businesses and individuals.
Financial analyst - Wikipedia, the free encyclopedia (934 words)
An analyst will write reports on the companies they are supposed to cover, trying to describe the businesses and their opinion of the companies investment potential, usually from a fundamental analysis standpoint.
Financial analysts also work in mergers and acquisitions departments, preparing analyses on the costs and benefits of a proposed merger or takeover.
Some financial analysts, called ratings analysts (who are often employees of ratings agencies), evaluate the ability of companies or governments that issue bonds to repay their debt.
  More results at FactBites »

 
 

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