How are business analysis different from financial analysis?

Financial Analysis:

In finacial analysis, analyst analyse any business/company/project from accounting and fincancial perspective.(for example : Analysis of Balance Sheets, Assets Management, Trend Analysis, Forecasting, Analyzing Capital Markets and providing viable results using it.) 

Business Analysis:

In business analysis analysts are responisble for capturing requirements, analyze business processes and perform needs assessment, providing best practices from analogies, building/improving processes to optimize Business.

 

Business Analysis VS Financial Analysis.

Business Analysis is usually qualitative Analysis and Financial Analysis usually quantitative Analysis.

Business Analysis

The term business analysis refers to the discipline of identifying needs within a business, and determining the appropriate solution. These solutions may include changes in the organization itself, strategic development or development of new policies. The person who takes on the responsibility of business analysis is called a business analyst. Usual technique used in Business Analysis:

·         MOST- Mission (where the business intends to go) Objectives (the key goals that will help achieve mission) Strategies (the different options for moving forward) Tactics (how the different strategies are put into action)

·         PESTLE -Political (Current and future political influences) Economic (The local, national and world economy impact) Sociological (Different ways society can affect an organization) Technological (The effect of new and emerging technology) Legal (The effect of national and world legislation) Environmental (Local, national and world environmental issues)

·         CATWOE- Customers (who benefits from the highest level business process and how does the issue affect them?) Actors (who is involved in the situation? Who is implementing solutions? What will impact their success?) Transformation Process (what processes or systems are affected by the issue?) World View (what is the big picture and what are the wider impacts of the issue?) Owner (who owns the process or situation being investigated and what is their role in the solution?) Environmental Constraints (what are the limitations that will impact the solution and its success?)

·         SWOT- Strengths (examine advantages and what is done well within the company) Weaknesses (examine the disadvantages and areas that need improvement) Opportunities (examine opportunities for improvement in all areas, including market share) Threats (examine the obstacles the business faces in accomplishing their goals)

 

Financial Analysis

Financial analysis (also referred to as financial statement analysis or accounting analysis or Analysis of finance) refers to an assessment of the viability, stability and profitability of a business, sub-business or project.

Financial Statement analysis, Company Valuation, Risk Analysis, Ratio Analysis, Capital Budgeting technique ( NPV, IRR, PI, ARR, PB)

 

 

The Business Analyst's job is mainly to gather the users requirements, make sure that the system/process is developed according to the requirements and verifying on behalf of users that the users are getting what they require. There are business analysts in working in different domains like telecom,banking,insurance etc.I have seen Testing people transition to Business Analyst after a few years experience in certain domain. Financial analyst job is usually handled by people with finance background like people with Accountancy degree/CA/MBA Finance. This deals with more of Balance sheet, Financial forecast, etc. Financial Analyst can perform the Business Analyst job provided he has the exposure to requirement elicitation and verification.

Business Analysis has realtively broader scope and work with project management on a full life cycle and does encompass finance to a greater extent.

 

Financial analysis is more specific and concentrate more of financial viability of a project / segment / business.

The following are the major differences between Business Analysis and Financial Analysis:

1. Business Analysis is wider than Financial Analysis

2. Business Analysis include both financial and non-financial analysis whereas Financial Analysis include only financial related analysis

3. Business Analysis is done with the objective to imporove the overall picture of business. Whereas financial analysis is done with the ojective to improve the financial part of the business.

4. The person who is doing the Business Analysis is called Business Analyst where as the person who is Financial Analysis is called Financial Analyst

 

in business analysis the financial analysis is an inclusion. The analysis also scopes the entire business dynamic, both inetrnal and external and looks across its entire functionality and engagement. It is therefore a multifunctional analysis. 

Business Analysis or Portfolio Analysis cuts across all functions of a company for instance finance function, marketing function & sales function, research & development function, human resource function, accounting function while Finacial Analysis is a sub-set of business or portfolio Analysis that looks at mainly monetary aspects for instance debt-equity ratios, profitability ratios etc

A business analyst's job is to study the business processes and devise optimal solutions for automation of those processes. This includes gathering requirements from users as well as management perspective and suggest the most viable solutions meeting those requirements. 

A financial analyst carries out the market insight to make profitable investment decisions. 

The expertise of business analyst is required in adopting optimal approach in the development of system while the expertise of financial analyst is required in making the right investment decisions for both short and long term.

The business analyst focus of the needs of the business rather than the financial aspects for the business.

Ideally a Business Analyst should be able to do some financial analysis, not as indept as a financial analyst, but have an idea of costing atleast, because analyzing the business means coming up with feasible business requirements within a certian financial scope which too is important for business continuity.

Business analysisThe focus of a business analysis is optimal processes supported by efficient (i.e. value, quality and constraints) ICT solutions

Financial analysisThe focus of a financial analysis is how to put money into the most efficient use (i.e. getting the most out of an investment given a certain risk profile).

Both of these are part of the “information” side of decision making, they will inform decision makers about the most optimal investments. The business analyst does this based on process and functionality, the financial analyst based on risk and return