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Good Financial Analysts Are Made-Not Born

Financial Analysis Skills

Financial analysts are very key personnel in the organizations. They offer advice on the investments decision the company should adopt. Therefore, they should have sound portfolio of skills to ensure the business is operational in the long run. According to the David McCann (2012) in the articleGood Financial Analysts Are Made, Not Born” financial analysts should possess the following skills. A student SampleORDER YOUR PAPER NOW

Inductive and Deductive Skills

Inductive skills involve seeing a pattern in data and coming up with different conclusions on the cause and relationship of the various data points. Similarly, in financial analysis requires the financial analyst to scrutinize the available financial data keenly and form information on the financial trends of the company. On the other, deductive skills are based on the experience. Using deductive analysis, the financial should be able to study past financial trends and advice the management on the future financial trends of the company.

Hypothetical skills

Finance analyst should be able to carry out test various hypothesis to arrive at the conclusion whether the company should engage in a particular project or not. Testing hypothesis enables the company to avoid unnecessary losses.

Occam’s razor Skills

This skill requires the financial analyst to carry test on the simplest option in competitive choices. The analysis using this skill enables the company to use the cheapest available option effectively.

Key Financial Ratios

Return on Total Assets

This ratio indicates returns on the total investments of the company. It is a measure of the productivity the assets both at the current financial period and in the future. For example, before creditors and investors making a decision whether to engage a company they require Return on Total Assets ratio to predict the future performance of the company.

Return on Equity

This ratio provides the rate of return on shareholders’ funds. A good Return on Equity ratio is an indication of company future prosperity.

Profit Margin

Indicates the company return on sales resulting from current operations. A profitable business in an indication of current foundation for great performance in future.

Gross Profit Margin

An indication of company ability to meet operating expenses and yield profit. It is an indication the company can operate efficiently in future. A student SampleORDER YOUR PAPER NOW

Reference

McCann, D. (2012, June 20). Good Financial Analysts Are Made, Not Born. Retrieved from http://ww2.cfo.com: http://ww2.cfo.com/training/2012/06/good-financial-analysts-are-made-not-born/

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