Editing Financial analyst (section)

==Role==
Financial analysts can work in a variety of industries. A large proportion of them are employed by [[Mutual fund|mutual-]] and [[pension fund]]s, [[hedge fund]]s, securities firms, banks, [[investment bank]]s, insurance companies, and other businesses, helping these companies or their clients make investment decisions.<ref name="BLS1" /> In corporate roles, financial analysts perform budget, revenue and cost modelling and analytics as part of their responsibilities;<ref name="roberthalf" /><ref name="BLS2" /><ref name="BLS3" /> credit analysis is likewise a distinct area.<ref name="BLS4">[https://www.bls.gov/oes/current/oes132041.htm Credit Analysts], Bureau of Labor Statistics</ref>

Financial analysts invariably use [[spreadsheet]]s (and [[statistical software]] packages) to analyze financial data, spot trends, and develop forecasts. The analyst often also meets with company officials to gain a better insight into a company's prospects and to determine the company's managerial effectiveness.

Analysts specializing in advanced [[mathematical modeling]] and programming are referred to as "quants"; see {{slink|Finance#Quantitative finance}} for an overview, and {{slink|Quantitative analysis (finance)#Types}}  for the various roles.

===Securities firms===
{{Main|Securities research}}

In a stock [[brokerage]] house or investment bank, the analyst will<ref name="Dahlquist" /> read company financial statements -  applying [[financial analysis|financial statement analysis]]  -  and analyze commodity prices, sales, costs, expenses, and tax rates in order to [[Business valuation|determine a company's value]] and project future earnings. On the basis of their results, they [[Research report|write reports]] and make presentations, usually making recommendations—a "[[trade idea]]"—to buy or sell a particular investment or security.

Typically, at the end of the assessment, an analyst would provide a rating recommending or investment action: to buy, sell, or hold the 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, "junior" analysts use the data to model and measure the financial risks associated with making a particular investment decision. See {{slink|Securities research#Career path}}.

Usually, financial analysts study a specific industry—called "[[Securities research#Analyst specialization|sector specialists]]"—assessing current trends in business practices, products, and industry competition.<ref name="collegegrad.com 2" /> Among the industries with the most analyst coverage are [[biotechnology]], [[financial services]], [[Energy industry|energy]], [[mining]] and resources, and computer hardware, software and services. Analysts 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. As equity analysts divide securities by distinct sectors, companies which fall outside or across multiple sectors are sometimes [[Neglected firm effect|neglected]]; the impact on returns (and on "[[earnings management]]") here is debated.<ref>{{cite journal |jstor=10.1086/210178 |title=The Categorical Imperative: Securities Analysts and the Illegitimacy Discount |first=Ezra W. |last=Zuckerman |s2cid=143734005 |date=18 May 1999 |journal=American Journal of Sociology |volume=104 |issue=5 |pages=1398–1438 |doi=10.1086/210178 }}</ref><ref>Laura Lindsey, Simona Mola (2013).[https://www.sec.gov/files/rsfi-wp2013-04.pdf Analyst Competition and Monitoring: Earnings Management in Neglected Firms], DERA Working Paper 2013-04</ref>

Analysts also specialize in fixed income. Similar to equity analysts, ''fixed income analysts'' [[Bond valuation|assess the value]] and [[Corporate bond#Risk analysis|analyze the risks]] of various securities, here focusing on [[Interest rate derivative|interest rate-]] and [[Fixed income security|fixed income securities]], particularly [[Bond (finance)|bonds]]. They may further specialize, but here by issuer-type: i.e. [[municipal bond]]s, [[government bond]]s, and [[corporate bonds]]; the latter specialization is often decomposed into [[convertible bond]]s, [[High-yield debt|high-yield bonds]], and [[Distressed securities|distressed bonds]]; some cover [[syndicated loan]]s. The reporting focuses on the ability of the issuer to make payments—similar to the credit analysis [[#Credit analysts|described below]]—but also on the [[Bond valuation#Relative price approach|relative value]] of the security in question, and in context of the overall market and [[yield curve]]. See [[Fixed income analysis]].

Analysts are generally divided into [[Sell-side analyst|'sell-side']] and [[Buy-side analyst|'buy-side']].  The buy-side is sometimes considered more prestigious, professional, and scholarly, while the sell-side may be higher-paid and more like a [[Sales and trading#Sales|sales and marketing role]].  It is common to begin careers on the sell-side at large banks then move to the buy-side at a fund.

* A sell-side analyst's work is not used by its employer to invest directly, rather it is sold either for money or for other benefits by the employer to buy-side organizations. Sell-side research is often used as 'soft money' rather than sold directly, for example provided to preferred clients in return for business. Writing reports or notes expressing opinions is always a part of "sell-side" (brokerage) analyst job and is often not required for "buy-side" (investment firms) analysts. It is sometimes used to promote the companies being researched when the sell-side has some other interest in them, as a form of marketing, which can lead to [[Conflict of interest|conflicts of interest]].
* A buy-side analyst,  such as a [[fund manager]], works for a company which buys and holds stocks itself, on the analyst's recommendation.  As they gain experience, analysts often move from buy-side research, concerning individual securities and sectors, into [[Portfolio manager|portfolio management]] itself, selecting the [[Asset allocation|mix of investments]] for a [[Investor#Institutional investor|company's portfolio]].  They may also become fund managers and manage large investment portfolios for [[Investor#Retail investor|individual investors]].

Typically, analysts use [[financial statements]] analysis, including accounting analysis and [[ratio analysis]], but also consider overall economic situation and specific factors including interest rates, employment, production, management and tactical evaluation of the market environment. Analysts obtain information by studying public records and [[SEC filing|filings by the company]], as well as by participating in public [[earnings call]]s where they can ask direct questions to the management. Additional information can be also received in small group or one-on-one meetings with senior members of management teams. However, in many markets such information gathering became difficult and potentially illegal due to legislative changes brought upon by corporate [[Accounting scandals|scandals]] in the early 2000s. One example is [[Regulation FD]] (Fair Disclosure) in the United States. Many other developed countries also adopted similar rules.

Analyst performance is ranked by a range of services such as StarMine owned by [[Thomson Reuters]] or Institutional Investor magazine. Research by [[Numis]] found that small companies with the most analyst coverage outperformed peers by 2.5 per cent — while those with low coverage underperformed by 0.7%.<ref>{{cite web |last=Walker |first=Owen |date=2018-02-03 |title=Brokers and Managers Grapple with Mifid 'Inducement' Rule |url=https://www.ft.com/content/473a37a8-1720-11e8-9376-4a6390addb44 |website=[[Financial Times]]}}</ref>
See [[Neglected firm effect]].

===Investment Banking===
{{See also|Investment banking#Corporate finance|Investment banking#Research|Corporate finance#Investment banking}}

Financial analysts in the [[investment banking]] departments of securities or banking firms often work in teams, analyzing the future prospects of companies, and selling shares to the public for the first time via an [[initial public offering]] (IPO), or [[Bond (finance)#Issuance|issuing bonds]]; this task is often identical to that of a securities analyst. On this basis, they will then make presentations to prospective investors re the merits of investing in the new company, presenting their "[[pitch book]]s" on a "[[Financial roadshows|roadshow]]"; see [[bookrunner]] and [[securities underwriting]]. An additional component of the IB role here: analysts ensure that all forms and written materials necessary for compliance with [[Securities and Exchange Commission]] regulations are accurate and complete.

Many IB analysts work in [[mergers and acquisitions]] (M&A) departments, similarly preparing analyses on the costs and benefits of a proposed merger or takeover, and assisting with [[Securities regulation in the United States|regulatory submissions]]; here there are both buy-side- and sell-side analysts. See {{slink|Chinese wall#Finance}}. The analysis is somewhat more specialized than for an IPO, as it must consider [[Mergers and acquisitions#Business valuation|valuation pre- and post-merger]], a function of efficiencies, synergies, or increased market share, [[Mergers and acquisitions#Financing|financing employed]], including M&A specific considerations such as the [[swap ratio]], and [[Tax_avoidance|tax optimization]], both re the transaction and for the new entity.<ref>Stephanie Overby and John Labate (2021). [https://deloitte.wsj.com/articles/tax-planning-to-drive-m-a-transaction-value-01623265329 Tax Planning to Drive M&A Transaction Value], ''[[Wall Street Journal]]''</ref>

At more senior levels, <ref name="princetonreview"/> [[Vice president#In financial services companies|vice presidents]] (VPs) or Senior VPs will manage the workflow and deliverables—with modelling performed by Associate VPs—but not be involved in the line-by-line detail ''per se''. [[Corporate title#United States|Directors]] will be responsible for [[Rainmaker (business)|"rainmaking"]] and maintaining existing client relationships. The latter role incorporates a significant advisory element—guiding the client regarding [[Relative valuation|their profile and exposure]] in the [[capital markets]], and [[Investment banking#Corporate finance|advising on M&A]] and other corporate activity <ref>Shaun Beaney, Katerina Joannou and David Petrie [http://www.icaew.com/en/technical/corporate-finance/corporate-finance-faculty/what-is-corporate-finance-122299 What is Corporate Finance?], Corporate Finance Faculty, [[ICAEW]], April 2005 (revised January 2011 and September 2020)</ref> (and liaising with [[sales and trading]]).

Investment banks, and large trading houses, often employ an [[Economist#Professions|economics team]] or group. This team produces the [[economic forecast]]s informing the various valuations and overall [[investment strategy]];<ref>[https://www.investopedia.com/articles/financial-careers/08/financial-career-options-professionals.asp#toc-economic-analyst "Economic Analyst"], investopedia.com</ref> see {{slink|Investment banking#Research}} and [[Economic analyst]].

====Middle office====
Within banking, there are other non-quant analyst roles (not necessarily titled "financial analyst"), mainly within the [[Investment banking#Middle office|"middle office"]]; these are generally linked, at least [[Solid line reporting#Dotted-line (indirect) reporting|by dotted line]], to both the Finance and Risk Management areas.

* [[Corporate treasury|Corporate Treasury]] is responsible for an investment bank's funding, capital structure management, and [[liquidity risk]] monitoring; see {{slink|Bank#Capital and risk}}. It is then (co)responsible for the bank's [[funds transfer pricing]] (FTP) framework, allowing for comparable financial performance evaluation among business units
* [[product control|Product Control]] is primarily responsible for [[P&L Explained|"explaining" the P&L]]; i.e.: attributing returns to [[Trading room#Organization|individual desks]], [[PnL Explained#Sensitivities method|decomposing these]] into their [[Risk factor (finance)#Financial Risks for the Market|risk factors]], and ensuring that traders' positions [[Mark-to-market accounting|are reflected]] at [[Fair value|their market values]]; the tools here are often built by a separate quant team, possibly [[Investment banking#Front office|front office]], but maintained by Product Control.
* Credit Risk monitors the bank's debt-clients on an ongoing basis, as [[#Credit analysts|described below]]; it is additionally responsible for tracking the [[risk capital]] and [[Risk-adjusted return on capital|risk adjusted returns]] on these clients, and reporting [[concentration risk#Monitoring and management|re concentration risk]] and [[risk appetite]].

These areas, together with the various dedicated [[Investment banking#Risk management|Risk Groups]], allow the Finance department to advise senior management regarding the firm's global risk exposure and the profitability and structure of the firm's various businesses; see {{slink|Financial risk management#Banking}}.

A [[comptroller]] (or financial controller) is a senior position, responsible for these analyses and [[internal control]] more generally, usually reporting to the bank's [[chief financial officer]], as well as copying the [[chief risk officer]].

===Corporate and other===
As outlined, the job title is a broad one, and analyst-roles also include [[financial management]] and (credit) risk management. 

====Financial planning and analysis====
[[Financial management#Role|Financial analysts within corporates]]<ref name="Dahlquist">[https://openstax.org/books/principles-finance/pages/1-4-careers-in-finance Careers in Finance]. §1.4 in {{cite book |title=Principles of Finance |date=2022 |isbn=9781951693541 |first1=Julie |last1=Dahlquist |first2=Rainford |last2=Knight |first3=Alan S. |last3=Adams |publisher=OpenStax, Rice University |url=https://open.umn.edu/opentextbooks/textbooks/principles-of-finance }}</ref><ref name="corporatefinanceinstitute">[https://corporatefinanceinstitute.com/resources/careers/jobs/financial-analyst-job-description/ Financial Analyst Job Description], Corporate Finance Institute</ref><ref name="FP&A">{{cite web |url=https://careernavigator.accaglobal.com/gb/en/job-profiles/proficient/financial-planning-and-analysis--fp-a--professional.html |title=Financial Planning and Analysis (FP&A) Professional |website=CareerNavigator.AccaGlobal.com |publisher=[[Association of Chartered Certified Accountants]] |access-date=2023-07-07 }}</ref> provide inputs into all elements of the firm's financial management.<ref name="AFP"/><ref name="collegegrad.com" /><ref name="BLS2">[https://www.bls.gov/OOH/management/financial-managers.htm#tab-2 Financial Managers], Bureau of Labor Statistics</ref>

* The short term focus is on [[working capital management]], and includes tasks such as [[profitability analysis]], cost analysis,  [[Variance (accounting)|variance analysis]], and [[cash flow forecasting]] (often overlapping [[Treasury management#Corporate Finance|treasury management]]).
* Medium term elements are [[corporate budget|budgeting]] and planning; their models here form the basis for [[financial forecast]]ing, [[scenario analysis]] (sometimes re corporate strategy),<ref name="SiegelShim1997">{{cite book |first1=Joel G. |last1=Siegel |first2=Jae K. |last2=Shim |first3=Stephen |last3=Hartman |title=Schaum's Quick Guide to Business Formulas: 201 decision-making tools for business, finance, and accounting students |url=https://books.google.com/books?id=4JpojQPk8YsC |access-date=12 November 2011 |date=1 November 1997 |publisher=McGraw-Hill Professional |isbn=978-0-07-058031-2 }} §39 "Corporate Planning Models". See also, §294 "Simulation Model".</ref> and [[Corporate finance#Capitalization structure|balance sheet optimization]]. <ref name="BLS3">[https://www.bls.gov/ooh/business-and-financial/budget-analysts.htm#tab-2 Budget Analysts], Bureau of Labor Statistics</ref> The latter, extends to involvement with [[dividend policy]], and [[capital structure]]; relatedly, forecasts here also feed into group [[Asset and liability management|ALM]].
* Analysts are also involved with long term "[[capital budgeting]]", i.e. decisions relating to [[Corporate finance#Investment and project valuation|"project" selection and valuation]] and related funding considerations; these forecasts feed through to the [[debt capital markets]] team, "DCM", responsible for securing and managing long-term funding. 
* [[Financial risk management#Corporate finance|Risk analytics]] will span all perspectives. Similar to treasury though, the team may reside in a [[Responsibility center|separate unit]]; see [[Three lines of defence]].

Management of these deliverables sits with the [[financial manager]] (FM); while [[budget analyst]], [[cost analyst]], [[Treasurer#Corporate treasurers|treasury analyst or manager]], [[Risk manager|risk analyst or manager]] and [[corporate finance analyst]] are often specialized roles. The area overall is sometimes referred to as "[[FP&A]]" (Financial Planning and Analysis).<ref name="AFP">[https://fpacert.afponline.org/certification/what-is-fp-a  What is FP&A?], [[Association for Financial Professionals]]</ref><ref name="FP&A"/> The [[financial director]] or chief financial officer (FD, CFO) has primary responsibility for managing the company's finances, including financial planning, management of financial risks, record keeping, and financial reporting.

====Credit analysts ====
There are several analyst roles related to [[credit risk]], macro or micro.<ref name="BLS4" /> [[Ratings agency|Ratings analysts]] (who are often employees of [[ratings agencies]]), evaluate the ability of companies or governments that issue [[bond (finance)|bonds]] to repay their debt. On the basis of their evaluation, a management team [[Bond credit rating|assigns a rating]] to a [[Corporate bond|company's]] or [[Government bond|government's bonds]]. 

Financial analysts employed in [[Commercial Loan|commercial lending]] perform balance sheet analysis, examining the borrower's [[Financial statements|audited financial statements]] and corollary data in order to similarly assess lending risks, and to confirm that [[Yield spread#Yield spread analysis|yield is appropriate given risk]]; this task is both upfront and on a monitoring basis thereafter.  The focus is on current and forecasted [[Financial ratio#Debt ratios (leveraging ratios)|debt-]] and [[Financial ratio#Liquidity ratios|liquidity ratios]] generally, and specifically those related to any [[loan covenant]]s, such as [[debt service coverage ratio]] (DSCR) and [[loan-to-value ratio]] (LTVR).

In [[retail banking]], [[credit analyst]]s build models to determine an applicant's creditworthiness, assign an initial [[credit score]], and monitor this and the loan on the basis of an ongoing [[Consumer_credit_risk#Scorecards|"behavioral" score]]. In this and the latter role, [[Impairment (financial reporting)|impairment-]] and [[Provision (accounting)|provision]]-modelling are a prominent deliverable (see [[IFRS 9]]); the [[probability of default]] (PD), [[exposure at default]] (EAD) and [[loss given default]] (LGD) statistics or models are (often) provided by a separate (but dedicated) [[Quantitative analysis (finance)#Risk management|credit-quant]] team.

====Accounting analysts ====
Some financial analysts specialize as [[accounting analyst]]s; they will collect industry data (mainly balance sheet, income statement and capital adequacy in banking sector), merger and acquisition history and financial news for their clients. They then typically "standardize" the different companies' data, facilitating  [[peer group analysis]]: the main objective here is to enable their clients to make better decisions about the investment across different regions. They also provide the abundance of [[financial ratio]]s calculated from the data gathered from financial statements, and possibly other sources.