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Financial Analyst Practice Exam

Financial Analyst Practice Exam


Financial Analysts are one of the most in-demand professions in the financial services industry. The primary role of a financial analyst is to sift through data in order to uncover opportunities or evaluate outcomes for company decisions or investment recommendations. Financial analysts can work at all levels of a corporation, from junior to senior, and it's a specialized field that frequently leads to other opportunities.


Since the financial services business is so competitive, it may be tough to break into. It is one of the most desirable jobs in the financial services business is that of a Financial Analyst. Financial Analysts, also known as Financial Research Analysts, can work in both junior and senior positions within a company, and it is a niche that frequently leads to further changes. The financial services business is competitive, and breaking into the analyst area can be difficult, but there are some steps you can take to prepare for this job. If you want to be a financial analyst, there are a few things you need to know to prepare yourself for the position.


Skills acquired 

Becoming a certified financial analyst will help you in developing the below-mentioned skills:

  • Financial Knowledge
  • Analytical skills
  • Leadership Skills
  • Decision Making 
  • Attention to details
  • Accounting Skills
  • Interpersonal Skills
  • Ratio Analysis


Recommend knowledge

In general, irrespective of the educational background, becoming a successful financial analyst requires

  • Strong quantitative skills
  • Expert problem-solving abilities
  • Adeptness in the use of logic
  • Good communication skills.


Who Should take the exam?

The Financial Analyst exam is suitable for candidates who want to develop their abilities and strengthen their CVs, especially newly graduated students. This qualification will assist you in obtaining the greatest career opportunities within the company.


Career opportunities 

Learn the fundamentals of finance and you'll be on your way to a brighter future. Financial Analysts are in high demand. Finance firms are always looking for qualified Finance Analysts. Finance Analysts are needed by a variety of public and private companies' accounting and finance divisions.


Roles and Responsibilities

A Financial Analyst's responsibilities are as follows:

  • To track indicators and report on them, as well as to do financial projections.
  • To create financial decision-making models and keep track of financial success.
  • Analyze prior data, conduct variance analysis, identify trends, and make recommendations for improvement
  • To establish and implement policies and procedures, as well as to steer the cost analysis in the right direction.
  • Recognize trends and make recommendations for improvement based on the trends' analysis


Topics Covered 


The Financial analyst practice exam covers the following topics:

Generational forms of Business

Forms of Business Organization
Proprietary Concerns
Joint Stock Companies
Co-Operative Organizations
Public Enterprises
Comparison among Different Forms of Organisations
Market Value and Stock Prices versus Book Value

Organization Chart & Finance Function

Fictional Organization
Product / Market Organization
Line and Staff functions/Relationship/ Authority
Functional and Line Authority
The Concept of Finance

Finance Function-Organization, Objectives & Decisions

Corporate Finance
Corporate Finance & Other Functions
Organization of the Finance Function
Objectives Financial Management
Profit Maximization
Wealth Maximization
Other Finance Functions

Financial Statements, Analysis and Information

Balance Sheet
Profit and Loss Account
Financial Statements-Analysis & Interpretation
Comparatives Financial Statements
Common Size Statements
Projected Balance Sheet
Statement of Changes in Financial Position(SCPP)
Funds Form Business Operations
Statement of Changes in Total Resources

Cash Flow Statement

Type of Cash Flow
Actual Flow of Cash:
Notional Cash Flow
The notional outflow of cash
Source of Cash Inflow
Net Profit Method
Outflow of Cash
Changes in Current Accounts
Change in Current Liabilities

Corporate Income Tax

Personal Taxation and its Influence on Firm
Deductibility of Expense
Set-Off and Carry forward of Losses

Time Value of Money

Simple interest
Future Value at Simple Interest
Present Value
Compound Interest
For Series of Payments
Future or Compound Value
Present (or Discounted) Value
Multi-period or Semi-annual and other compounding
Net Present Value
Internal Rate of Return
Mathematical Derivation of Formula for Future/Compound Value of Annuity

The Financial Securities

Equity Shares
Features of Equity Shares
Advantage of Equity shares
Disadvantages of Equity Share
Preference share
Feature of Preference share
Types of Preference Shares
Advantage or Merits of Preference Share
Disadvantages of Preference shares
Debt Securities-Debentures or Bonds
Features of Debentures or Bonds
Types of Debentures
Advantage of Debentures
Disadvantages of Debentures
Treasury Bills (T-Bills)

The Financial Markets

Functions of Financial Markets
Classification of Financial Markets
Methods of Floatation
Indian Capital Market Participants
Scenario of Indian Capital Market
Transaction cost in Capital Market

International Financial Markets

International Financial System and Foreign Exchange Market
Market Features of International Markets
Euro Currency Market
Functions of Eurocurrency Market
Eurobond Market
Brief Procedure in Eurobonds Issues

Financial Institutions

Activities of UTI includes
UTI Schemes
Industrial Development Bank of India(IDBI)
Major Schemes of IDBI
Industrial Credit and Investment Corporation of India (ICICI)
Industrial Finance Corporation of India (IFCI)
Industrial Reconstruction Bank of India (IRBI)
Industrial Investment Bank of India (IIBI)
Insurance Companies
General Insurance Corporation (GIC)
Stock Holding Corporation of Indian Ltd.(SHCIL)
Ratings
Rating Factors
Credit Rating and Information Services of India Ltd (CRISIL)
Information and Credit Rating Agency (ICRA)
Duff and Phelps

Interest Rates

Role of Interest Rates
Interest Rates and Share Prices
Factors Influencing Interest Rates
Rates in Gilt –edged Market
Private and Government Bond Rates
Rates of Borrowings and Leading by Commercial Bank
Interest Rates on Small saving
Export Credit

Basic Valuation Model

Bond Valuation
Valuation of Preference Shares
Stock Valuation
Single Period Valuation Model
Multi-period Valuation Model
Zero Growth Model
Constant Growth Model
Stock Valuation: The P/E Ratio Approach
Market Efficiency

Risk

Systematic or Non Diversifiable Risk
Unsystematic or Diversifiable Risk
Measures of Risk
Rate of Return
Probability Distribution
Continuous Probability Distributions
Standard Deviation of Return
Risk Return Relationship
Diversification and Risk
Measurement of Portfolio Risk
Beta
Security Market Line

Investment Decision Rules

Category of Investment Decision Rules
Accounting Income-based Decision Rule
Return on Capital
Return on Equity
Cash Flow-based Decision Rule
Decision rule

Cash FLow

Cash Flow
Definition
Need for Cash Flow Statement
Discount Rates
Estimation of Cash Flow
Depreciation & Taxes
Components of Cash Flow
Initial investment
Annual Net Cash Flows
Terminal Cash Flows

Incremental Analysis

Allocated Overheads
Opportunity Costs
Incidental Effects
Sunk Costs

Break-Even Analysis

Variable Costs
Fixed cost
Semi-variable Cost
Contribution Margin
Strategies for Break-even Point
Utility of the Break-even Analysis
Shortcomings of the Break-even Analysis

Project Proposals

Project Proposal Stage
Tasks during Project Proposal Stage
Change Management

Investment Decisions

What are Capital Investment Decisions?
Why is Capital Investment Decisions Important ?
Growth
Risk
Types of Capital Investment Decisions
Expansion and Diversification
Replacement and Modernization
Capital Investment Evaluation Criteria

Capital Budgeting Techniques

Capital Budgeting
Net present Value (NPV) Method
Internal Rate of Return Method
Profitability Index or Benefit-cost Ratio
Payback Method
Discounted Payback Period
Accounting Rate of Return Method

Financial Structure – Capital

Financing Decision
Financial Structure
Types of Capital
Factor Affecting Financial Structure
Agency Costs

Financial Distress – Remedial Options

Financial Distress
Reorganization
Restructuring
Merger
Acquisition
Takeover
Defence Mechanisms

Corporate Restructuring Options

Divestitures
IPO Roll-Ups
Going-Private Transactions
Alternatives to the Corporate Form
The Market for Corporate Control
Synergistic Mergers
Strategic Mergers and Acquisitions
The Twenty-First Century
Successful Merger
Upon Completion

Cost of Debt

Concept of the Cost Capital
Cost of Debt
Debt Issued at Per
Debt Issued at Discount or Premium
Cost of Term Loans

Cost of Capital

Cost of Preference Capital
Irredeemable Preference Share
Redeemable preference shares
Cost of Equity Capital
Is Equity Capital Free of Cost
Cost of Retained Earnings
Zero-growth
Cost of External Equity
Realized Yield Approach
Capital Assets Pricing Model Approach
Bond Yield plus Premium Approach
Weighted Average Cost of Capital
Weight Marginal Cost of Capital
Book-Value Vs, Market-Value Weights

Financial Leverage

Leverage
Measure of Leverage
Application and Utility of the Financial Leverage
Impact of Financial Leverage on Investor’s Rate of Return
Financial Leverage and Risk
EBIT-EPS Analysis

Dividend Policy

Dividend Policy
Dividend Decision
Shareholders’ Expectations
Financial Needs of the Company
Constraints on Paying Dividends
Stability of Dividends
Constant Payout
Danger of Stability of Dividends

Forms of Dividend

Cash Dividends
Bonus Shares
Share Splits
Reverse Split

Dividend Model & Its Decisions

Dividend Decision
Traditional Position
Walter Model
Gordon’s Dividend Capitalization Model
Miller & Modigliani Position
Rational Expectations Model

Financial Ratios

Meaning of Ratio
Types / Classification of Ratios
Liquidity Ratios
Activity Efficiency or Turnover Ratio
Profitability in relation to Sales

Working Capital Management

Components of Working Capital
Constituents of Current Liabilities
Significance of Working Capital
The Cash Conversion Cycle
Working Capital Policy
Current Asset Policy
Sources for Financing Working Capital
Shares and Debentures
Ploughing Back of Profits
Loans from Financial Institutions
Sources of Short term Working Capital
Installment Credit
Factoring or Accounts Receivable Credit
Accrued Expenses
Deferred Incomes
Commercial Paper

Bank Credit

Loans
Cash credit
Overdraft
Purchasing and Discounting of Bills
Principles of Bank Financing
Tandon Committee Report
Maximum Permissible Bank Finance (MPBF)
Chore Committee Report
Credit Authorization Scheme



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