A financial analysis research paper details a company’s financial health.  If you’re doing an MBA or degree in finance at the end of the course, you’re required to write a financial analysis paper. A financial paper incorporates all the aspect of financial performance, of the company in a more coherent and comprehensive form. Who will use the research paper?  Investors and financial analyst to assess the company capability in delivering a solid return on their investment. Learning how to write a financial research paper is an important quest in your professional work, especially if you’re looking to become equity researchers and investment analysts. It will be part of your responsibility to write and present financial analysis papers to the firm’s management or investors periodically. You are required to learn and understand the format and analytical techniques to use in writing.

In this article, you will learn the format and the essentials needed to complete a winning financial analysis paper. Read along to find out critical secrets to researching and writing the paper that appeals and informs the targeted audience.

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How to Write A Financial Analysis Paper?

One of the main uses of the financial analysis research paper is to help the company’s stakeholder make individual decisions. For example, an investor will want to know if the company is worth investing in. Unless for academic purposes, there is no specific approach to writing the research paper. Its presentation structure/style may vary, but the key components of the document must be incorporated into the analysis. Once you’ve all the elements of a financial analysis research paper intact, a conclusion is needed regarding the financial health of the business at play.

What Should an Excellent Financial Analysis Research Paper Have?

Executive Summary

This section that contains the essential research forms a financial analysis in brief, easy to read format. In most cases the financial analysis research paper end user will only focus on this section if they don’t have time to read the whole document. Executive summary encapsulates the data presented in other parts of the financial analysis research paper. The section includes the implication, those statistics have in the industry in a general form and the firm at large.  In most cases, this section provides a concise summary of the company mission, expected outlook, current performance, and its history. Also, the section will include an overview of the business, competition, and market conditions.

Financial Statement

Bear in mind the core of a significant financial analytical research paper is the collection of the companies’ financial statements. This collection is made up of the balance sheet, income statement, equity statement, and the business cash flow statement.

  • Balance sheet- displays how the business allocates its assets, liabilities and shareholder’s equity.
  • Income statement outlines the business earnings, losses, expenses, and profits.
  • Investment statement shows the changes in shareholders’ equity.
  • Cashflow explains where the business obtained its cash and how the cash was spent.

Industry Analysis

The business operates in an industry full of other company, and as such, the financial analysis research paper includes a section that examines the firm’s industry. The reports clearly show the comparison between the business financial health and what the competitors are experiencing. It also shows the firm’s market share and its prominence in the industry. These features assist the end user of the financial analysis research paper in finding out and determining if the company is competitive enough in the industry and if it’s an excellent investment to undertake.

Financial Ratios

In the financial analysis research paper, there is a critical section that reveals various significant aspects of the company such as its liquidity, debt, and efficiency of the business. Financial ratio analysis includes current liquidity ratio, debt ratio, return ratio and price to income ratio.  Current liquidity ration studies the relationship between the firm’s current assets to its current liabilities. The debt ratio is reached upon the first total debt compared to its total equity.  Note that the return on equity ratio weighs the income of the company against the equity of its shareholders. Another significant ratio in the financial analysis research paper financial ration section is a price to income ration. It’s calculated by dividing the present market price per share by the after-tax income per share.

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The Basis of a Professional Financial Analysis Paper

The process of writing a professional analysis paper is an instrument in ensuring that an investor gets all the information needed when considering a company. Here is an outline you can use to compose a financial research, analysis paper for a specific company.

Business Overview

Describe the business clearly for the financial analysis paper end user to understand the company, its market, operation environment, motivation and any advantage it has over its competitors.  The overview is critical is explaining if the business is a lucrative venture an investor can undertake. To start, consider the company annual reports with the securities and exchange commission.

Investment Thesis

Uncover the bullish or bearish stance of the firm through this section. It may come at the top of a report, and its analysis must cover the original investment negatives and positives.

Valuation

An investor or your financial analysis research paper audience will want to see an independent value for the stock compared to the current market price. To accomplish this, there are three valuation techniques you can use.

  • Discount cash flow analysis- estimates the business’s future cash flow and discount them back to the future at the projected discount rate.
  • Relative value- a student of fundamental metrics and valuation ratios including prices to sale ratio, income ration and P/E to business growth ration all compared to what the business competitors.
  • Book value- this tries to estimate what the business any be worth if it collapses or liquidates.

Lastly the principal risks and other consideration that helps to detail the key aspects that might disrupt either an optimist or bearish stance. This part covers corporate governance, the political environment that is worthy of comprehensive financial analysis paper. Anything significant that can affect the future value of the stock must be included in the financial analysis paper.

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