Hey everyone,
In today’s video, I’ll be happy to explain ‘What does a financial analyst actually do’.
We’ll distinguish between financial analysts working at investment firms and the
ones employed by traditional businesses. I’m sure I’m the right person to share these
insights with you because I’ve worked as a financial analyst both on the investment
side and inside a traditional business. Before we get started, I would like to
ask you a quick favour though–please hit the like button and subscribe for this
channel. This will help us reach even more people here on YouTube. Thanks so much!
There are several different types of investment firms who hire financial analysts. These are:
- Asset managers - Private equity firms
- Hedge funds - Venture capital firms
- The investment arms of insurance companies - Real estate investment trusts (REITs)
- Mutual funds - Big 4 firms
- And Pension funds The common denominator is that these organizations
need financial analysts who can help them assess companies from the prism of investment potential.
In most cases, they study externally available financial statements to identify suitable
investment opportunities. Financial analysts working for investment companies have an
external perspective – their main focus is identifying and acquiring assets with superior
ROI. A financial analyst working for an investment firm is rarely involved in the core operational
activities of the businesses they invest in. Let‘s say that Alex is a financial analyst
at an investment firm. Here’s how we can describe an extensive part of her work. After
extensive industry research, she delves into evaluating SolarTech, a leader in the renewable
energy sector. Through detailed industry and financial analysis, Alex assesses SolarTech's
profitability, liquidity, and growth trends. She makes a preliminary valuation of the business
employing both Multiples and Discounted Cash Flow methods. This rigorous analysis culminates in
a presentation to the investment committee, highlighting SolarTech's investment potential.
As the board decided to advance with the project, Alex and her team undertake due diligence. Their
access to data and management allows for more precise financial forecasting, refining financial
models to guide the firm's investment decisions. All of this sounds exciting and you would like
to become a financial analyst? Good news! Make sure you checkout 365 Financial Analyst – our
complete program that teaches all practical skills necessary to land a job as a financial
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Of course, most businesses are not investment firms. Instead, they sell goods and services
to clients trying to conduct their economic activity in a profitable manner. These
companies need financial analysts who would help them study revenue development
and profitability on an ongoing basis. Typically, small businesses with (50 to
200 employees) can afford a few financial analysts (sometimes even just one). In
this case, a financial analyst has much more extensive responsibilities and acquires a
complete 360-degree visibility of the business. In large firms, this isn’t the case
as financial analysts tend to focus on a specific part of the business only
and pay much greater attention to it. Here’s our example of a financial
analyst’s work at a traditional company. Jordan was hired as a financial analyst by
TechEquip - a traditional manufacturing firm. They have around 200 employees and a very
small finance team. As a financial analyst Jordan’s role is to provide management a
monthly report with analyses related to revenue development by top clients, by product,
and by location. He extracts this data from the firm’s ERP system and then prepares the
analysis and data visualizations in Excel, finally putting this work in PowerPoint and adding
comments on important developments. In some cases, to be able to provide more context, Jordan talks
to marketing and sales agents and figures out what truly happened with the business in order
to be able to explain revenue development. He also works extensively on cost analysis,
closely collaborating with the firm’s financial controller. By mid-month Jordan prepares a report
on product, client, and location profitability at the EBITDA level. In addition, the finance manager
shared with Jordan that when year-end approaches, he would have to help her prepare a
budget and forecast the development of relevant financial items for next year.
As you can see the financial analyst role with traditional companies can be very exciting
and offers a steep learning curve too. I hope you enjoyed this video and it helped
you understand better ‘what does a financial analyst actually do’.
Thanks for watching!
