Financial analyst

From Academic Kids

A financial analyst (or securities analyst, research analyst, equity analyst) works with financial analysis. In the US, financial analysts are sometimes referred to as Wall Street analysts, just as financial services firms in that country are sometimes referred to as Wall Street firms. 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.



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. They also summarize that report with a rating, such as "buy", "sell", "market perform", "overweight", "hold", etc.

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 (Full Discolusure), is said to prevent most of this from happening at present.

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 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. They often meet 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.

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.

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.


It is often required for analysts to earn an MBA to advance beyond a certain level within a firm.


Some analysts will advance to become a part of senior management in a "Wall Street" firm. Sallie Krawcheck after school went to work as an analyst for Sanford Bernstein (in 2005 a unit of Alliance Capital Management Holdings) was promoted to CFO of Citigroup in November, 2004.


The research department sometimes don'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. Since 2002 there have been an 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). Research firms are sometimes separated into two categories, "brokerage" and "independent", the independent research are not part of an investment firm and don't have the same incentive to issue overly favorable views on companies.


The 2002 Wall Street scandal arose from percevied biased research analysis. See also the "global settlement" of late 2002.

Noted analysts

See also

External links



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