Stepping into the stock market world can be a revolutionary step for you for earning profits. When you make investments in a company’s equities you should have knowledge about its stock, its financial health, revenue, and other essential factors. Many stock market enthusiasts opt for financial advice, whereas others learn financial analysis for evaluating stocks and then invest in them. In this article, we will give you an overview of financial analysis and financial advice and tell you which is the best technique for gaining profits. 

Financial Analysis: An Overview

Financial analysis is the procedure of evaluating projects, budgets, businesses, and various other finance-related transactions for determining their suitability and performance. It is used for analyzing whether a stock is liquid, solvent, stable, or profitable for warranting a monetary investment.

When conducted externally, this financial or stock analysis will help investors to choose the best investment opportunities. And, when it is conducted internally, it will help fund managers to make better future business decisions. 

Furthermore, it is used for evaluating economic trends, building long-term plans for organizational activity, setting financial policy, and identifying companies or projects for investment. This process is conducted through the amalgamation of financial data and numbers.

A financial analyst examines an organization’s financial statements- balance sheet, income statement, and cash flow statement. The analysis can be conducted in both investment finance settings and corporate finance. 

Comparing the financial statements against those of other companies or with the company’s historical performance is one of the most common ways to analyze financial data. For example, ROA or Return on Assets is used for determining how efficient an organization is at using its assets and resources and also as a measure of profitability. This ratio can be calculated for a myriad of companies in the same industry and can be compared to each other for a larger analysis. 

  • Corporate Financial Analysis

Incorporate financing, there is an internal analysis conducted by the accounting department and is further shared with the management in order for improving business decision-making. This kind of internal analysis includes ratios such as IRR or Internal Rate of Return, NPV, or Net Present Value to find out projects that are worthy of executing. 

For large receivable balances companies, it is practical to track DSO or Days Sales Outstanding, which helps the organization in identifying the time length it takes for turning a credit sale into cash. The average collection period is a crucial aspect of an organization’s total cash conversion cycle.

One of the key areas of corporate analysis entails extrapolating an organization’s past performance, such as profit margin or net earnings, into an estimate of the organization’s future performance. This kind of historical trend analysis is profitable in identifying seasonal trends.

  • Investment Financial Analysis

In this analysis, for investment purposes, an external analyst conducts analysis for a company. Financial analysts can take a bottom-up or top-down analysis approach. A top-down approach looks for macroeconomics opportunities first, for example, high-performing sectors, and then work down to find out the best organizations or companies in that industry.

Furthermore, they analyze the stocks of the specific organizations for choosing the potential successful companies for investment by looking at the organization’s fundamentals. 

On the contrary, a bottom-up approach involves looking at a specific organization and then conducting ratio analysis identical to the ones incorporated analysis, looking at expected future performance as well as past metrics as investment indicators.

They consider the microeconomics perspective and factors mainly. Factors such as demand and supply, services and products offered, and other such individual indicators of the corporate performance over time. 

Financial analyst jobs are peaking as stock market investors and traders want a thorough and perfect analysis of a company and its stocks for investments. 

  • Types of Financial Analysis

Broadly, there are two types: Fundamental Analysis and Technical Analysis.

  1. Fundamental Analysis

Fundamental analysis uses the company’s data and ratios within the financial statements for analyzing the companies. Data such as EPS or Earnings Per Share is evaluated for determining the business’ value. An analyst calculates the intrinsic value for security by using ratio analysis as well as an in-depth review of economic and financial conditions surrounding the company.

The end goal of fundamental analysis is arriving at a number that a trader or investor can compare with a stock’s current price in order to check whether the security or the stock is undervalued or overvalued.

  1. Technical Analysis

In technical analysis statistical trends such as MA or Moving Averages are used for analyzing the company. The assumption of technical analysis is that a stock’s price already shows all publicly available information and instead it focuses on the price movements’ statistical analysis. In technical analysis, patterns and trends are analyzed instead of a security’s fundamental attributes in order to grasp the market sentiment behind price trends.

A financial analyst through stock market analysis provides an investor with well-researched and well-informed data that leads to profit enhancement and making wiser investment decisions. Through graphical representations and statistics, data are presented which are logical and systematic. These analysts examine each detail with apt attention and present you results that are worth investing. 

Financial Advice: Overview

Financial advice is the process in which a financial advisor helps you in making decisions on where to put your money, what investments to make, and other courses of action. An advisor often conducts trades on behalf of his client and uses his expertise and knowledge for constructing personal financial plans for achieving the client’s financial goals. Not just investments, an advisor also helps in planning savings, retirement plans, budget, insurance, and tax strategies. 

The first step in the financial advisory is having knowledge of your financial health. You cannot plan for the future without considering your present financial status. You will be asked to fill up a questionnaire that will help your advisor in knowing you properly. The advisor can better assess your situation with the information you provide.

  • Financial Plan Creation

Your advisor will help you in building up a comprehensive financial plan for your investments. This serves as a roadmap to your financial stability journey. From the questionnaire you fill up, your advisor will analyze your financial situation including your liabilities, net worth, working or liquid capital, and create a financial plan. 

This lengthy document provides information about several topics, including your risk tolerance, long-term care risk, family situation, estate planning details, and other important financial issues currently and in the future.

  • Financial Investments and Advisors

You should never follow your advisor’s recommendations without asking questions or clearing your doubts. It is your money and your advisor has to clear all the doubts you have and all the clarifications you need. Also, keep a close eye on what fees you are paying to your advisor and for the funds that are bought for you. 

A common characteristic of firms is the selection of financial products based on the risk profile of the clients. With a smaller net worth and a greater willingness to take on more risk, a 40-year-old might choose to allocate 70% of their portfolio assets to stocks, 25% to fixed-income investments, and 5% to alternative investments.

You will also have the opportunity to set up your own portfolio while considering the firm’s investment philosophy. It should be built on how soon you will need the money, your present and future goals, and your investment horizon. 

  • Financial Monitoring

Regular financial monitoring is a must in your financial plan. A regular statement containing an update on your portfolio will be sent to you by your advisor. Moreover, your advisor will also conduct regular meetings for reviewing your goals and progress. 

Aside from regular, ongoing meetings with your financial advisor, you should also consult with him when you anticipate making significant changes in your life that might affect your finances too, such as getting married or divorced, planning for a child in your family, buying or selling a home, changing jobs, or getting promoted at work.

Who is better? Financial Analysts or Financial Advisors?

Financial analysts, as already mentioned, analyse thoroughly a company’s data, its trends, financial statements, and price trends and provide you with reports for making better investments. Financial analysis is a research-based profession. An analyst evaluates both the financial health of his or her clients and the broader economic factors and then bases his or her recommendations on these findings.

On the other hand, financial advisors carry out client-centered relationship management functions. They mainly look at the goals of their clients and then base their advice on the client’s capabilities and needs. 

It is always profitable to conduct a financial analysis of a stock or an industry. It lets you make better-informed decisions, optimize cash flow, reduce risk exposure, and increase profit margin. 

You can conduct successful financial analysis by using StockEdge, a stock screener app. The StockEdge “Scans” are an extraordinarily valuable feature that lets you scan your preferable stocks as per your choice. You can scan stocks based on “Option Scans”, “Fundamental Stocks”, “Price Scans”, “Future Scans”, and many more such filters. You can filter out companies and stocks based on cash flow, turnover, solvency scans, price patterns and movements, candlestick patterns, money flow index, and moving averages. 

StockEdge has a myriad of financial tools for stock analysis starting from providing FII/DII activity, portfolio management, scans, charts, equities, mutual funds, end of day analytics, visualizations, timely alerts, and much more. You can plot fundamental parameters, candlestick charts, and OHLCs using interactive “Edgechart”, a futuristic charting tool offered by StockEdge.

In addition, you can draw the end-of-day technical parameters as well as trend lines. A number of traders and investors have succeeded in outperforming the benchmark index as well as making enough money to generate wealth for themselves.


Financial analysis is a crucial aspect of stock market investing. Without doing financial analysis, one must never think of investing in stocks and securities. It will be like committing suicide. Therefore, learning and gaining knowledge of the topic, performing it, and then making investments become easier and a more reliable plan. With StockEdge, you can practice your skills and give an edge to your investments.