Financial Analysts Play a Number of Roles Essay

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Financial analysts play a number of roles within an organization. They made assessments of the value of investments the firm has or may have in the future. They can specialize in determining the value of projects. In addition, financial analysts are engaged in risk assessment, and take steps to determining the best ways for the firm to mitigate the risks that have been identified. Overall, financial analysts use a multitude of different knowledge sets including taxes, finance, economics and risk management to assist the company in making the best financial decisions for the firm (BLS, 2010).

a )The net profit would be the gross profit less operating expenses, interest expenses and tax expenses. Thus, the net profit is: $1,000,000 - $345,000 - $125,000 = $530,000. From this the taxes are removed: $530,000 * (1-.3) = $371,000. The preferred stock dividends of $57,000 must then be removed in order to determine the earnings available for common shareholders:

$371,000 - $57,000 = $314,000.

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b) The company has 15,000 shares outstanding and declared a dividend of $4.25 per share. This is $63,750. The increase in retained earnings therefore is:

$314,000 - $63,750 = $250,250.

3. Financial ratios are a set of ratios that are used to measure the financial performance of a firm. Based on the financial statements, the ratios measure the firm's liquidity, solvency, profitability, operating performance, returns, cash flow and investment valuation (Loth, 2011).

Financial leverage is the degree to which the firm's operations are financial by debt. A high degree of leverage reflects a high debt level; low leverage is low debt. The higher the debt, the more of a firm's earnings are earmarked for debt repayment. Thus, there is greater risk to the equity shareholder the more debt a firm has, as the firm's ability to generate a.....

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