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3-2 Project One: Financial Analyst Job Aid

Ayanna Knight

Southern New Hampshire

FIN-320-X2129 Principles of Finance 21EW2

November 14, 2021

Financial Analyst Job Aid

Financial management involves activities such as planning, directing, monitoring, organizing, and governing the monetary incomes of an organization. It also includes applying management philosophies to `the financial assets of an organization while also playing a vital part in economic management.

Importance of Financial Management

Financial management provides trails to accomplish goals and purposes in an organization, with the chief duty of financial forecasters being to measure administrative efficiency through proper distribution, attainment, and management, which is attained through; providing leadership in financial forecasting; cutting down expenses, assisting in obtaining funds from diverse sources; preparing strategies for earning maximum returns with lowest costs and, providing information through monetary reporting.

financial Responsibilities

Financial analysts play the following responsibilities;

· Analyzing current and past financial data and performance to determine whether the company is working towards success and measures to be taken to make more improvements (Goetzmann, 2020).

· Evaluating current capital expenditures and depreciation and looking for the necessary renovations on organizations’ assets.

· Exploring investment opportunities and advice on the most profitable one for the organization.

· Classifying trends in monetary presentation and providing endorsements for improvements

· Creating and assessing profit strategies can help take the organization to the next level.

Financial Management Decisions

By examining the present and past monetary data and presentation, the organization can know its stand and the areas which need improvements to reach its goal. For instance, which costs need to be reduced to get the targeted profit. In case of management doesn't have this information, it will be difficult for it to determine whether it's making the desired profit or not (Bradshaw et al., 2017). Likewise, the current capital expenditures and depreciation are analyzed. The management will know which property depreciates at a fast rate to avoid such if a new purchase is required. Otherwise, it will continue making losses on investing in a low-quality item.

Moreover, by exploring investment opportunities, the management can decide which investment to take and the one to leave. Without this information, the organization may invest in impractical businesses, which may not bring any returns to the business. Furthermore, by providing trends in financial performance, the organization can know which time of the year works better for the company and look for alternative ways to boost business in low earning months. Additionally, by establishing and evaluating profit plans, the management can make decisions based on the most profitable plan. Otherwise, it may find itself investing in less profitable businesses.

Accounting Principles

The basic principles of financial accounting management include objectivity, marching, revenue recognition, and consistency. For instance, the objectivity principle states that you should only use verifiable written information and not a subjective measure of value. That's why financial analysts list down any statistics related to finance in an organization. Marching principle also states that if an expense is incurred in the business, it can be recorded in the same period as related revenues. On the other hand, revenue recognition is a principle that identifies conditions in which revenue was recognized and determined how to account for that revenue.

Financial Statements

Financial statements act as good decision-making tools because they help the organization see the snapshot of its financial positions. This is because they show business trends: the rate at which the company is collecting receivables, how creditors are being paid, and any cash flow problems. Examples of the business financial statements include the balance sheet, cash flow statement, and income statement, offering unique but interconnected financial details. Thus, giving the compressive portrayal of the company's operating activities.

Financial Terminologies

· Financial Statement- they are written documents that display the organization's activities and financial performance. They include the balance sheet, the income statement, and the cash flow statement.

· Liquidity- This refers to how all the business assets can be converted into ready cash without affecting its market price. analysts' terms cash as the most liquid in the business while the tangible assets are known as less liquid though can be easily converted into liquid cash

· Working Capital refers to the difference between the company's current assets minus the company’s current obligations. What is left when we minus the two is what the business owns currently. That is in case of creditors claim their debts.

· Time Value Money- is the profit gained in case some amounts of money are invested. For instance, if you invest 1000 in a bank, and at the end of a year, you receive 1200, the 200 will be the time value of money. It can be termed as the profit one gains after investing something.

References

Bradshaw, M. T., Ertimur, Y., & O'Brien, P. C. (2017). Financial analysts and their contribution to well-functioning capital markets.

Goetzmann, W. N. (2020). The Financial Analysts Journal and Investment Management. Financial Analysts Journal, 76(3), 5-21.