How different is Financial Statement Analysis for a Credit Analyst VS. an Equity Research/Financial Analyst?
Are they roughly the same? except one is from the perspective of a lender vs someone who is doing the analysis for the Investment firm. so one focuses more on a company's future growth while the other focuses on the stability of a company?
My goal is to learn Financial Statement in general since i'll most likely be seeking an entry-level position as an Equities Research Analyst/Financial Analyst. (having a career change from the technology industry)
However, an acquiantance of mine recommended me to this online course offered by AIB:
http://www.aba.com/Products/PS98_051200.htm
but the financial statement analysis from this course is more directly related to someone in the banking inudstry... banker, loan officer, credit analyst...will this be a good learning material even if my goal is to work for an investment firm as a financial analyst?
Hi, I work as a corporate credit analyst at a ratings agency so here is my 2 cents:
If you think about it, the risk/return profile of equities and credit is very different. If you buy a stock your downside is that the stock price could fall to 0, but your upside is potentially infinite (stock price could go up forever). The opposite is true for bonds/loans. Your upside is limited to the coupon but your downside is that the issue defaults and you lose everything.
The result of this, in my opinion, is that credit analysis is more conservative and focused more so on worst case scenarios while equity analysis is focused on best case outcomes. Also, we tend to focus on different metrics than equity analysts. They focus on EPS growth, ROE (DuPont analysis) while we tend to focus on cash coverage ratios and leverage.
Having said that, both analysts still analyse the operations of a company the same and we both forecast FCF's and build pro-forma financials into the future. I think both roles could be quite interchangeable and there are quite a few former equity analysts working with me and quite a few guys who have moved over to the other side.
I would suggest looking into the CFA exams if you want to understand financial statements and the analysis that goes with it. If you clear level 1 you will have a good understanding of how the 3 statements interact and how to analyze them.
Best of luck!
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