How to Analyse a Company’s Capital Structure and Financial Risk

Starting an investment banking career as a fresher can feel overwhelming. The role is competitive and the skills are spread across accounting, finance, Excel and communication. It is not always clear where to begin or which skills matter most for finance career preparation.

PW Skills’ Investment Banking and Valuation course can help you work through this step by step. PW Skills offers recorded classes, live Saturday doubt sessions and real industry case studies, so you can practise investment banking skills on actual companies instead of only reading theory.

What Does an Investment Banker Actually Do?

Investment bankers help companies raise money and make major decisions, such as listing on the stock market, issuing bonds, acquiring another business or restructuring. To advise on any of these, they first need to understand a company’s financial position and decide what it is worth.

This is why financial statement analysis sits at the centre of the job. Analysts separate a company’s financial statements into their parts, examine each one and form a view about the firm’s past, present and future. Those views guide decisions on how money is allocated.

Step 1: Build a Strong Foundation in Accounting

Every analysis starts with the financial statements, so you need to read the balance sheet, income statement and cash flow statement comfortably. Focus on how the three statements connect, what each line item means and how accounting rules shape the numbers.

Accounting standards, often called GAAP, give analysts a common ground for comparison. They ensure consistent disclosure over time and allow comparisons between companies. However, standards differ between countries, so a fresher should be aware that two companies reporting under different rules may not be directly comparable without adjustments.

Step 2: Learn Who Reads Financial Statements and Why

Different users study the same statements for different reasons. Knowing these perspectives can help you understand what employers expect from you.

• Equity investors: They want to know how much cash the business generates and what its long-term earnings prospects look like.

• Lenders: They check whether the company can repay its debt, and they treat equity as a margin of safety.

• M&A specialists: They search for companies whose true worth is higher than their market price, and they often adjust financial statements to estimate economic value.

• Managers and auditors: Managers use the numbers to plan and control operations, while auditors check whether the statements are fair.

• Regulators and employees: Regulators monitor compliance, and employees use the data when negotiating pay.

As an investment banking analyst, you will often switch between these viewpoints within the same project.

Step 3: Understand the Limits of Financial Statements

Financial statements record past transactions, so they leave out some things that drive value. Skilled people, management quality, brand reputation and strategic position often do not appear as assets. Assets are usually recorded at historical cost, which may differ from what they are worth today.

A good analyst does not rely on the numbers alone. You can build this habit by asking whether the reported figure reflects current worth, what assumptions sit behind it and what information is missing. Management’s own disclosures can also carry some bias, so it helps to cross-check them with independent sources.

Step 4: Look Beyond the Numbers

Strong analysis also needs business context. Before judging performance, try to understand the economy, the industry, the competition, legal developments and the company’s strategy. Questions such as whether the industry is growing or mature, who the key competitors are and how sensitive the company is to economic changes cannot be answered from the statements alone.

As a fresher, you can practise this by reading annual reports, company filings and business news regularly and by noting how events affect a company’s results.

Step 5: Develop Valuation and Modelling Skills

Once you can read and question the numbers, you can move to the technical skills that investment banks use every day. These skills play an important role in investment banking, with each serving a specific purpose in financial analysis and valuation.

Practising these on real companies, rather than only on textbook examples, can help you build confidence for interviews and on-the-job work.

Step 6: Build Ethics and Communication Habits

Analysts publish opinions that influence investors, so integrity matters. Research can be pulled in different directions when a company or a client has a stake in the outcome, and an independent, honest view is part of the profession. Clear writing and confident presentation also help, because your analysis is only useful if others can understand it.

What Information Challenges Do Financial Analysts Face?

Financial analysts face several challenges when collecting, understanding and interpreting financial information. Five major obstacles can affect their ability to analyse a company's financial position accurately. These include:

1. Inconsistent Terminology and Format
   Different companies and analysts may use different terms and formats to describe similar financial items. For example, fixed assets, long-term assets, plant and equipment, and property, plant and equipment can refer to long-term economic resources. Financial statements may also differ in presentation, with some companies providing detailed information while others report only summary figures.

2. Data Volume
   Financial analysts often deal with large amounts of information from company disclosures, SEC filings, media reports and government publications. The challenge is to identify relevant, accurate and reliable information from these numerous sources.

3. Transaction Complexity
   Business transactions are becoming increasingly complex, making financial reporting more difficult. For example, reporting employee stock-based compensation is more complicated than recording regular hourly salaries because it involves additional accounting considerations.

4. Information Variability
   Information from different sources may vary in terms of accuracy, reliability and timeliness. Misleading or outdated information can affect financial analysis. Even audited financial statements may reflect management's perspective, so analysts should consider independent sources to reduce potential bias.

5. Financial Statement Limitations
   Financial statements do not capture every factor that influences a company's performance. Important elements such as employee morale, management quality, intellectual capital, business reputation and strategic positioning are difficult to measure and may remain unreported or underreported. Analysts must consider these factors when evaluating a company's overall financial position.

Learn Investment Banking with PW Skills Investment Banking Course

Knowing the steps is a starting point. Applying them takes practice with live data. PW Skills’ Investment Banking Course teaches you business valuation, financial modelling, M&A and LBO modelling through hands-on projects. It prepares you for roles in investment banking, corporate finance, equity research, valuation and private equity. You also receive the Investment Banking and Valuation Course Certificate from PW Skills after successfully completing the course*.

What you can learn:

• Financial Modelling: Build industry-standard financial models used in investment banking and corporate finance.

• Business Valuation: Practise valuation techniques such as DCF, comparable company analysis and transaction multiples.

• DCF Modelling: Use the discounted cash flow method to value a business.

• Financial Statement Analysis: Learn to interpret financial statements as part of analysing and valuing a company.

• Excel for Finance: Develop the Excel skills needed for finance work.

• Pitch Deck Preparation: Learn to prepare pitch decks and presentations.

• Capital Raising: Understand how organisations raise funds, a key part of how investment banks support businesses.

• Financial Forecasting: Build skills in forecasting a company’s financial performance.

Learn through real case studies:

• Tata Technologies IPO: Equity capital markets and the IPO process

• Adani Green Bond Issuance: Debt capital markets

• Wipro Acquisition of Capco: M&A strategy and valuation

• Private Equity LBO: Leveraged buyout modelling

• Jet Airways under IBC: Corporate restructuring and turnaround

Who can join:

• Students: B.Com, BBA, BA (Economics) and BMS students.

• Aspirants: MBA, CA, CMA and CS aspirants.

• Professionals: Finance professionals and working professionals who want to upskill.

Eligibility: You need to be pursuing or to have completed graduation. A finance background is preferred but not mandatory.

Starting an investment banking career as a fresher can feel overwhelming. The role is competitive and the skills are spread across accounting, finance, Excel and communication. It is not always clear where to begin or which skills matter most for finance career preparation.

PW Skills’ Investment Banking and Valuation course can help you work through this step by step. PW Skills offers recorded classes, live Saturday doubt sessions and real industry case studies, so you can practise investment banking skills on actual companies instead of only reading theory.