What Does a Financial Analyst Do

What Does a Financial Analyst Do? A Day in the Life

A financial analystFinancial Analyst Job DescriptionSee a real Financial Analyst Job Description including all the skills, experience, and education required to be the successful candidate for the job. Perform financial forecasting, reporting, and operational metrics tracking, analyze financial data, create financial models is responsible for a wide range of activities including gathering data, organizing information, analyzing historical resultsAnalysis of Financial StatementsHow to perform Analysis of Financial Statements. This guide will teach you to perform financial statement analysis of the income statement, balance sheet, and cash flow statement including margins, ratios, growth, liquiditiy, leverage, rates of return and profitability. See examples and step-by-step instruction, making forecasts and projections, making recommendations, and generating Excel modelsExcel & Financial Model TemplatesDownload free financial model templates - CFI's spreadsheet library includes a 3 statement financial model template, DCF model, debt schedule, depreciation schedule, capital expenditures, interest, budgets, expenses, forecasting, charts, graphs, timetables, valuation, comparable company analysis, more Excel templates, presentations, and reports. This guide will provide a detailed break down of a day in the life of a financial analyst, and answer the question, what does a financial analyst do?

To learn more about the real day to day life of an analyst, check out CFI’s Online Financial Analyst Courses, as they provide complete training on all of the most important skills that are required for the job.

List of What a Financial Analyst Does:

Analysts have many duties and responsibilities, depending on the organization they work for, the industry they are in, and their seniority. Below is a list of the most common things they do:

#1 Gather data and information

The work of a financial analyst starts with gathering data and information about whatever they need to analyze. Examples include historical financial reportsAudited Financial StatementsPublic companies are obligated by law to ensure that their financial statements are audited by a registered CPA. The purpose of the independent audit is to provide assurance that the management has presented financial statements that are free from material error.  Audited financial statements help decision makers, accounting data from the general ledger, stock price information, statistics and macroeconomicEconomicsCFI's Economics Articles are designed as self-study guides to learn economics at your own pace. Browse hundreds of articles on economics and the most important concepts such as the business cycle, GDP formula, consumer surplus, economies of scale, economic value added, supply and demand, equilibrium, and more data, industry research, and just about any other type of quantitative data. The information will be gathered from sources such as the company’s internal databases, third-party providers such as BloombergBloomberg TerminalThe Bloomberg Terminal is a popular and powerful tool for finance professionals around the world. Analysts in investment banking, equity research, and or Capital IQCapIQCapIQ (short for Capital IQ) is a market intelligence platform designed by Standard & Poor’s (S&P).  The platform is widely used in many areas of corporate finance, including investment banking, equity research, asset management and more. The Capital IQ platform provides research, data, and analysis on private, public, and government agencies such as the Securities and Exchange Commission (SEC).

#2 Organize information

Once the data is gathered it’s typically entered into Excel or some other type of database. Once inputted, the next task is to organize it, clean it up, and get it into a format it can be made sense of. This typically means sorting the numbers by data, or by category, adding formulas and functions to make sure it’s dynamic and using consistent formatting styles so that it’s easy to read and understand. See more Excel formatting tipsFinancial Model FormattingFinancial model formatting is a science all on its own. By formatting a financial model properly, the analyst maintains consistency, clarity and efficiency..

#3 Analyze financial results

With the data all cleaned up and organized in Excel its’ time for the financial analyst to start analyzing past information and historical results. This typically includes looking at ratios and metrics like gross margin, net margin, fixed vs variable costs, year-over-year (YoYYoY (Year over Year)YoY stands for Year over Year and is a type of financial analysis that's useful when comparing time series data. Analysts are able to deduce changes in the quantity or quality of certain business aspects with YoY analysis. In finance, investors usually compare the performance of financial instruments on) growth rates, return on equity (ROEReturn on Equity (ROE)Return on Equity (ROE) is a measure of a company’s profitability that takes a company’s annual return (net income) divided by the value of its total shareholders' equity (i.e. 12%). ROE combines the income statement and the balance sheet as the net income or profit is compared to the shareholders’ equity.), return on assets (ROAReturn on Assets & ROA FormulaReturn on assets (ROA), a form of return on investment, measures the profitability of a business in relation to its total assets. The ROA formula is used to indicate how well a company is performing by comparing the profit it's generating to the capital it's invested in assets.  The higher the return, the more), debt/equity ratio, earnings per share (EPSEarnings Per Share (EPS)Earnings per share (EPS) is a key metric used to determine the profit for the common shareholder's on a per share basis. Earnings per share measure each common share’s profit allocation in relation to the company’s total profit and can be calculated based on basic shares outstanding or fully diluted shares outstanding), and many others. The analyst will look for trends and benchmark the performance against other companies in the same industry. When asking what does a financial analyst do, this is one of the biggest components!

#4 Make forecasts and projections

Now that historical information has been analyzed, it’s time to make projects and forecasts about how the company will perform in the future. There is both an art and a science to predict how a company will perform, and many assumptions and even leaps of faith have to be made. Common forecasting methods include regression analysisRegression AnalysisRegression analysis is a set of statistical methods used for the estimation of relationships between a dependent variable and one or more independent variables. It can be utilized to assess the strength of the relationship between variables and for modeling the future relationship between them., year over year growth rates, as well as bottom-up and top-down approaches. Learn more in CFI’s Budgeting and Forecasting Course.

#5 Develop recommendations

A good financial analyst is not only good with numbers but actually generates insights and recommendations on how to improve the operations of a business. Examples of helpful recommendations and insights include ways to cut costs, opportunities to grow revenueSales RevenueSales revenue is the starting point of the income statement. Sales or revenue is the money earned from the company providing its goods or services, income, ways to increase market shareTotal Addressable Market (TAM)Total Addressable Market (TAM), also referred to as total available market, is the overall revenue opportunity that is available to a product or service if 100% market share was achieved. It shows the level of effort and funding that a person or company can put into a new business line. The concept is important to, operational efficiencies, customer satisfaction and much more. This is what truly separates a world-class financial analystWorld-Class Financial AnalystA world-class financial analyst has a unique combination of skills that enable them to have an enormous positive impact on an organization. Top skills are being able to analyze both quantitative and qualitative data, understanding detailed and big picture thinking, balancing simplicity and complexity from the rest. These recommendations will be presented to the CEOCEOA CEO, short for Chief Executive Officer, is the highest-ranking individual in a company or organization. The CEO is responsible for the overall success of an organization and for making top-level managerial decisions. Read a job description, the CFOWhat Does a CFO DoWhat does a CFO do - the job of the CFO is to optimize a company's financial performance, including: reporting, liquidity, and return on investment. Within a company, these responsibilities fall into departments typically known as the controller's group, treasury, and financial planning and analysis (FP&A), other executives and/or the board of directorsBoard of DirectorsA board of directors is essentially a panel of people who are elected to represent shareholders. Every public company is legally required to install a board of directors; nonprofit organizations and many private companies – while not required to – also establish a board of directors..

#6 Build Excel models

For analysts working in investment banking, equity research, corporate development, financial planning & analysis (FP&A), and other areas of corporate finance, financial modelingWhat is Financial ModelingFinancial modeling is performed in Excel to forecast a company's financial performance. Overview of what is financial modeling, how & why to build a model. A 3 statement model links income statement, balance sheet, and cash flow statement. More advanced types of financial models are built for valuation, plannnig, and will be a big part of the job. These models typically start by linking the 3 financial statementsHow the 3 Financial Statements are LinkedHow are the 3 financial statements linked together? We explain how to link the 3 financial statements together for financial modeling and valuation in Excel. Connections of net income & retained earnings, PP&E, depreciation and amortization, capital expenditures, working capital, financing activities, and cash balance and then layering on more advanced types of financial modelsTypes of Financial ModelsThe most common types of financial models include: 3 statement model, DCF model, M&A model, LBO model, budget model. Discover the top 10 types of Excel models in this detailed guide, including images and examples of each. Financial modeling is performed for many reasons including to value a business, raise money such as discounted cash flow analysis (DCF modelsDCF Model TemplateThis DCF model template provides you with a foundation to build your own discounted cash flow model with different assumptions. DCF Step 1 – Build a forecast The first step in the DCF model process is to build a forecast of the three financial statements, based on assumptions about how the business will perform in the), internal planning models, and more arcane models such as LBO models and M&A models.

Learn more about these in CFI’s Financial Modeling Courses.

Image from CFI’s Financial Analyst Courses.

#7 Make presentations

When someone asks, what does a financial analyst do, the answer will always include something to do with making presentations (often in PowerPoint). The analysis that’s completed in Excel then has to be turned into charts and graphsTypes of GraphsTop 10 types of graphs for data presentation you must use - examples, tips, formatting, how to use these different graphs for effective communication and in presentations. Download the Excel template with bar chart, line chart, pie chart, histogram, waterfall, scatterplot, combo graph (bar and line), gauge chart,, which can be then be inserted into pitchbooksPitchbookA pitchbook is a sales book used by investment banks to sell products and services, as well as pitch potential clients. The purpose of a pitchbook is to secure a deal with the potential clients. It provides an overview of the firm, including historical information, financial strength, and services available to potential clients. and management presentations. Learn more in CFI’s PowerPoint Presentations Course.

#8 Generate reports

Internal reports and dashboardsDashboard Creation in ExcelThis guide to dashboard creation in Excel will teach you how to build a beautiful dashboard in Excel using data visualization techniques from the pros. In order to create an effective Excel dashboard, follow these steps: organize your data, setup your page, brainstorm, select visuals, focus attention, tell a story are a part of the daily life of an analyst. Whether it’s presenting key performance indicators (KPIsKey Performance Indicators (KPIs)Key Performance Indicators (KPIs) are measures used to periodically track and evaluate the performance of a business or organization toward the achievement of specific goals. They are also used to gauge the overall performance of the company against other similar companies within the industry.) or tracking actual vs budgeted results, its imperative to the company or the client that information be clearly presented, timely, easy to understand, accurate, and insightful. To learn more, check out CFI’s Dashboards Course.

Types of Financial Analysts

Below is a list of the most common types of financial analysts:

• Investment banking analyst
• Equity researchEquity Research OverviewEquity research professionals are responsible for producing analysis, recommendations, and reports on investment opportunities that investment banks, institutions, or their clients may be interested in.  The Equity Research Division is a group of analysts and associates. This equity research overview guide analyst
• Treasury analyst
• Financial planning and analysis (FP&A)FP&A RoleThe Financial Planning & Analysis (FP&A) role is gaining greater importance today as it helps bring out crucial analysis on business performance. An FP&A role is no longer limited to management reporting but it also requires lots of business insights so that the top management analyst
• Private equity analyst
• Corporate developmentCorporate DevelopmentCorporate development is the group at a corporation responsible for strategic decisions to grow and restructure its business, establish strategic partnerships, engage in mergers & acquisitions (M&A), and/or achieve organizational excellence. Corp Dev also pursues opportunities that leverage the value of the company’s business platform. analyst

A Day in the Life of a Financial Analyst

Below is an example of a day in the life of a financial analyst working at a corporation on the FP&A team:

7:00 am – At home, check phone and email for any important messages before getting ready for work and commuting to the office.

8:30 am – Arrive at the office, respond to any urgent emails, follow-up on any outstanding items from the previous day.

9:00 am – Finance team meeting to discuss changes that need to be made to the Q4-2018 budget model, including updates to assumptions and changes to forecast.

10:00 am – Work on the budget model and made all updates and changes that were discussed in the meeting.

12:30 pm – Pick up lunch from a nearby deli and eat back at the desk while catching on financial news and videos on Bloomberg.com.

1:30 pm – Start working on the updated version of the Q4 board presentation including updates PPT slides and graphs in Excel.

4:30 pm – Circle up with manager and review changes to the budget model as well as the board presentation.

5:30 pm – Tend to some personal errands and respond to emails from friends.

6:00 pm – Finish up changes from 4:30 pm meeting with the manager and finalize the Excel model and PPT presentation.

7:00 pm – Head out of the office and meet some friend for dinner or head home.

Note: a day in the life can vary significantly depending on the industry, city, and the particular day. The above is meant to represent an average day for a corporate analyst. Other types of analysts, like those in investment bankingInvestment BankingInvestment banking is the division of a bank that serves governments, corporations & institutions, providing underwriting (capital raising) and mergers and acquisitions (M&A) advisory services., will work much longer hours.

Additional Resources

Thank you for reading this guide to better understand what does a financial analyst do. CFI is the official provider of the Financial Modeling & Valuation Analyst (FMVA)™FMVA™ CertificationThe Financial Modeling & Valueation Analyst (FMVA)™ accreditation is a global standard for financial analysts that covers finance, accounting, financial modeling, valuation, budgeting, forecasting, presentations, and strategy. certification program, designed to help anyone in that role become world class at their job. Additional resources to help you on your way include:

• Free Financial Modeling GuideFree Financial Modeling GuideThis financial modeling guide covers Excel tips and best practices on assumptions, drivers, forecasting, linking the three statements, DCF analysis, Excel modeling and much more. Designed to be the best free modeling guide for analysts by using examples and step by step instructions. Investment banking, FP&A, research
• Finance Interview QuestionsFinance Interview QuestionsFinance interview questions and answers. This list includes the most common and frequent interview questions and answers for finance jobs and careers. There are two main categories are behavioral and technical
• Finance Salary GuideFinance Salary GuideIn this finance salary guide, we cover several finance jobs and their corresponding midpoint salaries for 2018. Regardless of the industry, a good finance professional is difficult to find. Competition to hire and retain top talent in the fields of finance and accounting remains tough.
• Interactive Career MapMapInteractive Career Map - discover your career path in corporate finance. Learn which job is right for you: salary, personality, skills, certifications etc.