While waiting for the Level I exam results I figure I need to do some thing after one week break. How important is accounting knowledge for a Investment analyst? To what degree should an analyst be familiar with accounting stuff?
“Young men should learn accounting.” – Warren Buffett
Accounting knowledge is absolutely required in equity research.
Thanks for the reply, DarienHacker and sternwolf. Does that mean we have to be a CPA to become a good analyst? How much is enough?
cpa is just a certification (off which only one part is accounting)…the realm of technical accounting goes beyond the cpa exam…try understanding the concepts and what the particular accounting standard (SFAS) is trying to convey. For ER, in addition to the basic accounting principles (debit and credit rules) one needs to atleast have enough knowledge to understand the footnotes and other disclosures in the 10Ks, 10Qs and other related documents.
yeah, understanding the income stmt, balance sheet, statement of cash flows and how they link together is big. but I don’t think you need to know debits and credits.
Knowing debits and credits can really help you understand and analyze financial statements; however, I don’t think you need the CPA certification. Passing Levels I and II of the CFA program should provide a solid foundation.
Let’s say accouting has three levels: 1. introductory 2. intermediate 3. advanced Which level is sufficient for an financial analyst?
In Private Equity where it is likely that you will construct multi-layer corporate structures to benefit from a tax perspective, it’s absolutely beneficial that you have a solid understanding of Accounting.
“Let’s say accouting has three levels: 1. introductory 2. intermediate 3. advanced Which level is sufficient for an financial analyst?” Accounting and the CPA designation can not be qualified like that. I would say that the knowledge of FSA/FRD should be up to the “advanced” level. Which is the first (and hardest) CPA exam out of four. Maybe some Tax though. But you don’t need to know the entirety of Audit, Taxation, Managerial accounting, BEC, etc.