What is the most prominent factor a investment banker should consider while analyzing a company?

There are many such factors which need to be seen, but if someone is asking MOST importnat factor, then it should be PROMOTERS, to my mind

Factors Affecting Investment Banking Industry

The investment banking industry is a lucrative industry with millions of investors. It contributes to the GDP of many countries especially the developed ones and is often a major indicator of both capital markets and general economic health of a country. Despite this, the investment banking industry continues to portend great risk for both existent and potential investors.

There are many investors who have made large fortunes through this industry and yet there are those that have lost everything they once owned to the same industry. Yet one cannot underestimate the importance of this industry and potential investors have a good reason to dive in and become part of its success. There are very important factors that guide this industry and can help those who invest in it to avoid pitfalls and become more successful. These include:

Systemic risks in the industry

There are potential risks in this industry and such risks are caused by fluctuations in the economic sectors including currency value changes and also government policies. Changes in economic growth can also have an impact on the industry and any downward changes such as a recession can have negative effects on the industry. Some governments have undertaken policies that protect the investment banking industry. For instance, the US and European countries had a bad experience during the recession and this led them to tighten the laws regarding the industry. This has made it less risky for potential investors because the market is more regulated.

Efficiency of the banking system

It is important that the investment banking industry is efficient information and trade within the required times. It is also necessary for proper regulation to be conducted in the industry to ensure that the investors are well protected.

Technology helps to increase efficiency in investment banks.

Through technology the industry has moved up rungs and is able to serve its growing clientele. It is also possible to make more apt predictions concerning the market trends. Investors can actually use technology to identify the potential markets in which to venture into within the industry in different countries all over the world.

Regulatory system.

The investment banking industry is very competitive and sometimes the players might want to overlook some aspects in order to compete more effectively and attract more clients than their rivals. Often such a trend by a single player can trigger a ripple effect in the entire industry and this can cause players to take larger risks in a bid to make higher profits as well as enhance their competitiveness in the industry. This can only be prevented and kept in check by strong regulatory systems. The regulatory framework differs in each country and while some are strong, there are those that are easily to manipulate. However, there are countries which have curbed such practices and stabilized their capital markets by incorporating tight regulatory framework.

Investors who are interested in venturing into the investment banking industry should take their time to assess different markets before entry into the business. In as much as the industry has high risks, the gains are greater for those investors who do their homework well.

 

I believe that the most prominent factor is the level of transparency availed by the company in all areas including financial side.

 

Set of public information such as annual reports, filings with regulators and press or media information all of mentioned are public information which would be analysed by all investment professionals at large. These set of documents would be deemed to be very clean and information available would not be detailed to highlight any key issues going in the company. An analyst must contact creditors or suppliers of the company to understand its credit worthiness, learn the reviews of company manufactured products, review history of management or board members, speak to ex-employees, these are non financial aspects. Cost structure compared to industry and spending on research and development are some financial aspects.

Key financial ratios you must look at before making investment