Finance

What Does a Finance Analyst Do?

Business Advice | 13 July 2023 | 11 months ago

There are a lot of people who help a business to succeed and when it comes to money, a finance analyst plays a key role. A finance analyst is someone who helps a business to make smart and safe financial decisions. Whether you want to make a lucrative investment or you want to branch out into a new market, a finance analyst can advise you on the financial repercussions and risks of doing so. In this blog, we have taken a look at what a financial analyst does and whether your business needs one.

What is a Financial Analyst?

A financial analyst is someone who assesses the financial health and performance of companies, industries or investment opportunities. In business, they gather and analyse financial data, evaluate economic trends and make recommendations based on their findings. Financial analysts play a key role in assisting businesses, investors and financial institutions in making informed decisions about how money is spent. This includes looking at investments, acquisitions, mergers or financial strategies. By interpreting financial data, a financial analyst helps businesses make informed decisions, with as little risk as possible. As there is always something changing in the financial world, financial analysts need to stay up to date with trends and regulations.

Investment is also an area that financial analysts work in. They carry out research on various investment options, such as stocks, bonds, commodities, and real estate. They evaluate the performance, risks and potential returns of different investments to provide recommendations. With the information provided by finance analysts, it’s a lot easier to determine whether an investment is one that is worth making, or if it’s likely to cost you more than you could make.

What Does a Financial Analyst Do?

There is a lot that goes into the day to day role of a financial analyst. They review financial statements – such as income statements, balance sheets and cash flow information – to assess a business’ financial position and performance. They analyse financial ratios, trends and key metrics to identify strengths, weaknesses and potential risks. Financial analysts also use historical data and industry trends to develop financial forecasts and projections, and to conduct detailed financial research. They estimate future revenues, expenses and cash flow to help stakeholders make strategic decisions and evaluate investment opportunities for a business. If a business could make more money by making some financial changes, an analyst will highlight this.

Industry and market analysis is also a big part of what a financial analyst does. By assessing industry trends, market conditions and competitor analysis, financial analysts can better understand the broader economic factors that may impact a company’s performance. Using this information, they can determine likely risks and how to avoid making the wrong financial decision as a business. They consider factors like market volatility, interest rate fluctuations, industry risks and geopolitical events to assess the potential impact on investment returns. It’s a lot easier for businesses to make financial decisions with the expertise of an analyst on hand.

A financial analyst builds financial models to assess the value of investments or companies. They use various techniques to determine fair value and assess investment attractiveness, before passing their findings onto businesses. Financial analysts are usually working on behalf of a business or organisation, and so they prepare reports, presentations and financial models to communicate their findings. They must effectively convey complex financial information in a clear and understandable manner.

Does My Business Need a Financial Analyst?

There is no right or wrong answer to this question, as it really depends on the type of business you have and the financial decisions that you want to make. More often than not, larger and more established companies are the ones that utilise the services of a finance analyst. Due to the cost, it might not be a viable option for smaller businesses, or those with limited funds.

If you want to attract new investors or make better sense of your financial situation and opportunities, having a financial analyst is hugely beneficial. Not only will they help you to better understand where you are financially, but they can provide investors with the necessary information needed to make a decision. If your business is considering making investments or expanding into new markets, a financial analyst can help evaluate the financial viability and potential returns of these opportunities. They can also assess and manage financial risks, which can help to protect your business against unexpected challenges. They can identify potential risks in your business, such as market volatility, currency fluctuations, or interest rate changes, and develop risk management strategies to help your business stay financially healthy.

As a business owner, it’s important to know where you stand financially, but this can be difficult to get your head around. A financial analyst can assess your business’ financial health and performance by analysing key financial metrics, and then provide this information in an easy to understand way. They can provide insights into areas of improvement, help you understand the could boost your profits, and suggest strategies to enhance financial performance.

It’s easy to see how hiring a financial analyst can bring value to your business, but it’s important to consider the cost implications. For small businesses with limited resources, it may be more practical to outsource financial analysis tasks to a consulting firm or engage part time financial expertise as needed. The decision to hire a financial analyst depends on your business’s specific needs, complexities and the resources that you have available to you. It’s important to assess your requirements and consider the potential benefits, as well as how cost effective it would be, to have a financial analyst on board.

Sign up to our newsletter to get the latest from Business Advice.

 

Topic

Finance

Related Topics

Financial Planning for Small Business Owners
11 September 2023

Financial Planning for Small Business Owners

Read More →
Navigating Financial Challenges: 5 Tips for SMEs
17 August 2023

Navigating Financial Challenges: 5 Tips for SMEs

Read More →
What is Debt Financing?
14 August 2023

What is Debt Financing?

Read More →
What is Straight Line Depreciation and Why is it Important?
11 August 2023

What is Straight Line Depreciation and Why is it Important?

Read More →
Understanding VAT
3 August 2023

Understanding VAT

Read More →
Financial Planning for Small Businesses
2 August 2023

Financial Planning for Small Businesses

Read More →

If you enjoy reading our articles,
why not sign up for our newsletter?

We commit to just delivering high-quality material that is specially crafted for our audience.

Join Our Newsletter