In addition to regulated information from issuers such as the financial statements and notes in filings, analysts use a variety of other information sources for financial analysis, which we group by origin: issuers, public third-party, proprietary third-party, and proprietary primary research.
Monitoring Developments in Financial Reporting Standards Analysts need to monitor ongoing developments in financial reporting and assess their implications for security analysis and valuation. The need to monitor developments in financial reporting standards does not mean that analysts should be accountants. An accountant monitors these developments from a preparer’s perspective; an analyst needs to monitor…
IFRS (International Financial Reporting Standards) US GAAP (Generally Accepted Accounting Principles) International Organisation of Securities Commissions IOSCO’s comprehensive set of Objectives and Principles of Securities Regulation is updated as required and is recognised as an international benchmark for all markets. The principles of securities regulation are based upon three core objectives: IOSCO’s principles are grouped into 10…
The role of financial statement analysis is to use financial reports prepared by companies, combined with other information, to evaluate the past, current, and potential performance and financial position of a company for the purpose of making investment, credit, and other economic decisions. In evaluating financial reports, analysts typically have a specific economic decision in…
Financial Statement Analysis Framework Phase Sources of Information Output Articulate the purpose and context of the analysis. The nature of the analyst’s function, such as evaluating an equity or debt investment or issuing a credit rating.Communication with client or supervisor on specific needs and concerns.Institutional guidelines related to developing specific work product. Statement of the…
In general, the relationship between a current or present value (PV) and future value (FV) of a cash flow, where r is the stated discount rate per period and t is the number of compounding periods, is as follows: If the number of compounding periods t is very large, that is, t→∞t\rightarrow \infin , we…
Implied Return for Fixed-Income Instruments Fixed-income instruments are characterised by contractual interest and principal cash flows. If we observe the present value (or price) and assume that all future cash flows occur as promised, then the discount rate (r) or yield-to-maturity (YTM) is a measure of implied return under these assumptions for the cash flow…
A measure of central tendency specifies where the data are centred. For a return series, a measure of central tendency shows where the empirical distribution of return is centred, essentially a measure of the “expected” return based on the observed sample. Measures of location, mean, median, and mode include not only measures of central tendency…
The objective of exploratory data analysis (EDA) is to load data into structures most suitable for further analysis to identify and rectify any wrong/bad data and get basic insight into the data — the types of fields there are; whether they are categorical or not; how many missing values there are; how the fields are…
