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Fudamental analysis

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Fudamental analysis

  1. 1. FUNDAMENTAL ANALYSIS<br />
  2. 2. A method of evaluating a security that entails attempting to measure its intrinsic value by examining related economic, financial and political factors.<br />The earnings of the company, the growth rate and the risk exposure of the company have a direct bearing on the price of the share.<br />These factors in turn rely on the host of other factors like economic environment in which they function ,the industry they belong to, and finally companies own performance.<br />What is fundamental analysis ?<br />
  3. 3. The fundamental school of thought apparised the intrinsic value of shares through<br /><ul><li>Economic analysis
  4. 4. Industry analysis
  5. 5. Company analysis</li></ul>Economic analysis<br />The level of economic activity has an impact on investment in many ways.<br />The analysis of macro economic environment is essential to understand the behaviour of the stock prices.<br />
  6. 6. The commonly analysed macro economic factors are as follows.<br />Gross domestic product.<br />Savings and investment<br />Inflation<br />Interest rates<br />Budget<br />The tax structure<br />The balance of payment<br />Demographic factors<br />Economic forecasting<br />Diffusion index<br />
  7. 7. An industry is a group of firms that have similar technologcial structure of production and produce similar products.<br />The industries are basically classified into <br />Growth industry: The growth industries have special features of high rate of earnings and growth in expansion, independent of the business cycle<br />Cyclical industry: The growth and the profitability of the industry move along with business cycle. During the boom period they enjoy growth and during depression they suffer a set back. <br />Defensive industry: defensive industry is the industry which withstands during recession and depression.<br />Cyclical growth industry: This is new type of industry that is cyclical and at the same time growing.<br />Industry analysis<br />
  8. 8. The investor has to analyse some of the factors,such as <br />Growth of the industry : The historical performance of the industry in the terms of growth and profitability should be analysed. Industry wise growth is published periodically by the Centre for Monitoring Indian Economy.<br />Labour:The analysis of labour industry scenario in a particular industry is of great importance.The number of trade unions and their operating mode have impact on the labour productivity and modernisation of the industry.<br />Research and development: for any industry to survive the competition in the national and international markets,product and production process have to be technically competitive.<br />Pollution standards: pollution standards are very high and strict in the industrial sector. <br />Factors to be considered<br />
  9. 9. In the company analysis the investor assimilates the several bits of information related to the company and evaluates the present and future values of the stock. The risk and return associated with the purchase of the stock is analysed to take better investment decisions. The valuation process depends upon the investors ability to elicit information from the relationship and inter-relationship among the company related variables. The present and future values are affected by a number of factors(i.e)<br />Competitive edge<br />Earnings <br />Capital structure<br />Management<br />Financial performance<br />Company analysis<br />
  10. 10. The financial statement analysis is the study of a company’s financial statement from various viewpoints. The statement gives the historical and current information about the company’s operation.<br />The two main statements used in the analysis are:<br /><ul><li> Balance sheet
  11. 11. Profit and loss account
  12. 12. Comparative financial statements
  13. 13. Trend analysis
  14. 14. Common size statements
  15. 15. Fund flow analysis
  16. 16. Cash flow analysis
  17. 17. Ratio analysis. </li></ul>Financial analysis<br />
  18. 18. Thankyou.<br />

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