Working as an investment analyst is considered to be one of the long-standing and highly sought-after professions across the world. Millions of dollars are spent on research and analysis in various industries to determine the best investment instruments and several investors wait for months for the analysis reports being released before making investment decisions.
Investment Analysts are responsible for bringing out the critical elements of a company’s financial statement and these elements must be critical to the presentation and usage of the analysis reports. Reading various reports shows that numbers and transactions represent the point of focus in investment analysis and we all have the opportunity to relate numbers to our personal financial transactions
Understanding Financial Statements
I realized that numbers are just numbers, nothing should be complicated beyond this fact. It is a simple matter of arithmetic i.e. addition, subtraction, multiplication, and division of some figures appearing on the financial statements to interpret the performance of the various organizations being analyzed.
Seeing numbers in financial transactions as relatable numbers help us to quickly interpret the facts and figures without imagining that they are complicated. Revenue in a financial statement means the amount received from selling goods and services. Likewise, expense represents any amount incurred in the provision of goods and services to customers. It is not complicated, but we mostly do not believe so when we see financial statements.
Simple Financial Statement
The simple financial statement that I will like to introduce to everyone is the income statement, which captures the total revenue that a company sells, the total cost incurred to sell those items and the difference between the two values calculated to produce a value termed as Gross Profit. The simple equation to calculating this is Gross Profit = Selling Price – Cost Price.
Most of us can do this calculation for our small businesses or what we fondly call ‘Side Hustle’. If you pick up a pair of shoes from a vendor and decide to sell them with a small margin of about 10%. Let’s assume that the shoe costs you N20,000 and you add N2,000 as your margin for selling the shoe. It will be assumed that you sell it for N22,000. I am sure you can easily come up with an income statement on this pair of shoes alone.
Becoming an Investment Analyst
It definitely requires a lot of work to become a trained practitioner in any profession and your learning definitely has to start from a point. The most important requirement to gaining mastery is the ability to chart a course on the path of development with specific goals and timelines. You need to recognize that it is achievable and anyone who can read and write qualifies to be trained on this path of knowledge.
One of the things that Lagos Business School’s Executive MBA program affords is the foundational path to becoming an Investment Analyst and potential consultant in the field. One of our first semester courses in the MBA course is Corporate Financial Accounting, popularly referred to as CFA. This introduces all students to the fundamentals and principles of Accounting and helps us to relate to the elements of financial statements.
