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What-is-Financial-Analytics

Financial analytics utilizes data analysis and statistical methods to enhance commercial decision-making by providing insights into financial health and performance. It plays a crucial role in areas such as fraud detection, credit scoring, and market forecasting, helping businesses improve predictability and resolve financial roadblocks. Despite its importance, challenges like data integration and quality persist in financial analytics.

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14 views

What-is-Financial-Analytics

Financial analytics utilizes data analysis and statistical methods to enhance commercial decision-making by providing insights into financial health and performance. It plays a crucial role in areas such as fraud detection, credit scoring, and market forecasting, helping businesses improve predictability and resolve financial roadblocks. Despite its importance, challenges like data integration and quality persist in financial analytics.

Uploaded by

nl5577823
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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What is Financial Analytics?

Financial analytics uses techniques from data analysis, data science, and statistical
methods to analyze financial and non-financial data to support commercial decision-
making (https://www.knime.com/blog/financial-analytics)
It provides a different perspective on the financial data with accurate information. It
plays a vital role in calculating the overall profit of the business and making
proper business forcasting (https://www.accountsjunction.com/blog/financial-analytics-
what-it-is-how-its-used-and-6-basic-types)
For example, you can use a vast amount of financial data to perform financial
modeling, budgeting, forecasting, and performance analysis. The ultimate goal of
financial analytics is to improve the quality of financial decision-making by providing a
comprehensive view of financial health and performance.
Financial Analytics Use Cases (https://www.accountsjunction.com/blog/financial-
analytics-what-it-is-how-its-used-and-6-basic-types)
It is used mainly by the business owners and higher management of the company to get
proper business financial insights and make proper decisions about it. Financial analysts
collect all the raw financial details of the company and organize it in a proper way. A
well-drafted financial report is made using these financial data to get proper insights of
the financial aspects of the business.

1. Fraud detection: identify suspicious patterns earlier, minimize losses, protect


companys’ assets and reputaion.
2. Credit scoring and risk assessment: provides a data-driven foundation to evaluate an
individual or business's creditworthiness and predict the likelihood of default
3. Algorithmic trading: making automated trading decision, identify trading opportunities
and execute orders efficiently
4. Market forecasting: predict future market trends, price movements, and economic
conditions
5. Liquidity risk: mitigate this risk by providing insights and tools to improve decision-
making
6. Risk management: provides organizations with the tools and data needed to monitor
risk across various dimensions
7. Longevity risk: mitigate the risks associated with individuals or populations living
longer than expected

Why is Financial Analytics Important?


(https://www.accountsjunction.com/blog/financial-analytics-what-it-is-how-its-used-and-
6-basic-types)
1. Better insight of financial health: One of the primary aspects of Financial Analytics is
giving proper insights about the financial health of the business. It can help them to make
necessary technological progress and transform the business to a better level.
2. Resolving different financial roadblocks: There might be some roadblocks that might
be hampering the cash inflow of the business. With automation and data analysis, there
can be few ways to resolve these roadblocks and improve cash inflow of the business.
3. Improving predictability: It is very difficult for any business to make the exact
financial prediction of the business. However, with proper financial insights, business
owners could make better predictions of the financials of the business.
4. Increasing transparency:

Financial analytics involves


Financial Analysis Challenges (https://www.knime.com/blog/financial-analytics)

1. Difficult Data Integration from Multiple Sources


2. Poor Data Quality and Consistency
3. Complex Financial Modeling
4. Slow Manual Reporting Processes
5. Lack of Scalability

#5 Develop recommendations (https://www.linkedin.com/pulse/how-build-financial-


model-microsoft-excel-jehanzeb-khan): regards to what assets to invest in and what assets
not to invest in (recommendation and advice to clients
(https://corporatefinanceinstitute.com/resources/career-map/sell-side/capital-markets/
analyst-recommendations/)

Spectrum ranging from a “Strong Buy” to a “Strong Sell”

1. Cut cost, opportunities to grow revenue


2. Increase market share, operational efficiencies, customer satisfaction, and much
more…
#6 Build Excel models (https://www.linkedin.com/pulse/how-build-financial-model-
microsoft-excel-jehanzeb-khan)
Creating structured frameworks in Microsoft Excel that allow users to input data,
perform calculations, and analyze results for decision-making.
Step 1: Define the Purpose and Scope of the Model
Step 2: Gather and Organize the Data
Step 3: Create Assumptions and Formulas
Step 4: Build the Model
Step 5: Add Charts and Graphs
Step 6: Review and Refine the Model
Referrence Documents

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