Several types of analytical tools are available to help a good financial analyst develop the big picture and perform sanity checks on the results of a financial modeling project to ensure that results are reliable and within expectations.
Horizontal analysis helps identify abnormal changes over time.
Vertical analysis, or common-sized statements, can be used to develop insights into the economic characteristics of different industries and of different firms in the same industry.
Financial ratios are tools for interpreting financial statements to provide a basis for valuing securities and appraising financial and management performance.
Whilst these analytical tools can be deployed easily in an Excel spreadsheet, some financial analysts prefer to use commercial software to perform financial analysis, especially when dealing with large volumes of data or complicated data sets where a high degree of accuracy is required, or to automate manual data consolidation processes.
If you are across other types of commercial financial modeling and analysis software, please do let us know what they are by leaving a comment.
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