© 2000 John Petroff
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© 2000 John Petroff |
A- For whom is this manual intended
This manual is written for those who aspire to work as financial analysts in banks, investment companies, insurance companies, other financial intermediaries, or in financial departments of non-financial corporations. Anyone involved or interested in the field of finance may also find this text useful. Indeed, there is a deliberate intent to make the material immediately applicable and practical. The theory is kept to a minimum in order to make room for quick access to tools of the trade.
The sequence of chapters is organized to move from theoretical and abstract concepts to practical methods, and on to specific details of analysis and empirical evidence. A similar sequence is intended for each individual chapter wherever possible. And, in each chapter a parallel is established between various financial assets, and between different reasons for financial analysis. Such parallel is not usual for finance textbooks where discussions of bond buying, stock portfolio management, bank lending, and other financial decisions are treated separately; sometimes in separate books by same authors. It is believed that the present approach of pointing out differences and similarities between various types of financial analyses may give an additional insight in understanding the field of finance.
Although the manual is not designed to emphasize theories, it can be used for university courses at the graduate level, or for advanced courses at the undergraduate level. A student must have completed introductory courses in economics, accounting, finance and possibly banking. Wherever needed, the reader is referred to introductory textbooks on these subjects.
Another intent of this manual is for this text to be useful to students and practitioners in all countries of the world, especially developing countries and economies in transition. Most of the time, the financial markets described are those of the United States. This is most appropriate because American financial markets are the largest, the most technologically advanced and the most developed in terms of organization and legislation.
Occasional mention is made of financial decision characteristics found in other countries. An example of this can be found in Chapter 5 where American GAAP accounting system is describes, criticized and compared with other accounting systems; a conclusion that may emerge is that, since GAAP and international accounting systems are not fully harmonized, there may not be a single system to recommend for each and every country. Chapter 6 may possibly be found unique in finance literature. It presents a non-western accounting system and shows its drawbacks. The critique is harsh. The purpose is to demonstrate the importance of having purposely well-conceived financial data, by showing problems that arise when the financial data is not specifically intended for business decisions. Throughout several chapters other than Chapter 6, brief observations are inserted on conditions in Russia that also demonstrate unusual conditions in financial markets. Again, the intent is not to pick on a particular country, but to allow a comparison as well as an appreciation of when things are not working properly.
The comments about characteristics in various countries and the comparison that emerges, should be especially useful to readers in other parts of world, such as in developing countries and countries in transition where economic and social progress are stifled by inadequately functioning financial markets. Naturally, such readers must have command of the English language. However, some chapters have already been translated into Russian, and translation of the remaining chapters into Russian is planned. A Russian version is seen as priority because finance professionals in countries of the former Soviet Union have a very pressing need to master western financial knowledge and skills which were not necessary under communist central planning. Translation in other languages may be considered in the future. But it isn't sure that translation is necessary because it is undeniable that English is the language of business and especially the language of finance.
Thus, the textbook is most appropriate for those who are or planning to become financial analysts. In the United States, such professionals seek to receive the title of CFA, or Chartered Financial Analyst, awarded by the Association for Investment Management and Research (AIMR). To become a Chartered Financial Analyst, it is necessary to pass a series of very demanding exams. Because of the extent of financial and non-financial information that must be compiled and processed in analytical predictive function, the formation of financial analysts is usually a lengthy one (of several years). Also, as a result, a financial analyst is usually specialized in only a few companies or industries. The specialization, in turn, gives the analyst an expertise not only in financial aspects, but in engineering, administration, production and marketing techniques as well. Because other countries have not developed professional credentials similar to CFA, AIMR is administering its tests in numerous cities throughout the world, and more CFA diplomas are soon to exist outside the United States than within, as reported by Daniel Fisher in his February 21, 2000 Forbes article entitled "Credentialer to the World".
In the remainder of this introductory chapter, the overall purpose of this writing will be developed making sure that the themes of this manual will not be oversimplified and a reader is in the appropriate frame of mind. The chapter closes with the sources of information used by finance professionals. All that follows will refer to these sources because, naturally, analysis is processing information. Knowing what information to look for and where to find it, is half the work.
See review questions Q-1A.1 to Q-1A.6 and research assignment R-1A.1
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