This document provides an overview of fundamental analysis. It defines fundamental analysis as evaluating financial statements, reports, and economic factors to determine a firm's intrinsic value. It also defines intrinsic value as a firm's true economic value. Fundamental analysts use this type of analysis to forecast future stock price movements. In contrast, technical analysis examines supply and demand to determine price trends. The document also discusses economic analysis, including forecasting business cycles and defining recession. It covers industry and financial statement analysis as techniques used in fundamental analysis.

1. Fundamental Analysis
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2. Fundamental Analysis
 Fundamental analysis
 the practice of evaluating the information
contained in financial statements, industry
reports, and economic factors to determine
the intrinsic value of a firm
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3. Fundamental Analysis
 Intrinsic value
 the “true” or economic, value of a firm
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4. Fundamental Analysis
 Fundamentalist
 analysts who utilize analysis in an attempt
to forecast future stock price movements
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5. Fundamental Analysis
versus Technical Analysis
 Technical analysis
 examination of supply and demand for
securities to determine trends in price
movements of stocks or financial
instruments
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6. Fundamental Analysis
versus Technical Analysis
 Technicians
 the term given to analysts who examine
stocks and financial markets using
technical analysis
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7. Economic Analysis
 Forecasting business cycles
 to determine when to expect changes in the
business cycle, or the direction in which
aggregate economic activity is moving
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8. Economic Analysis
 Business cycle
 the movement in aggregate economic
activity as measured by the gross domestic
product (GDP)
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9. Economic Analysis
 Expansion
 increasing economic activity
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10. Economic Analysis
 Contraction
 decreasing economic activity
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11. Economic Analysis
 Gross Domestic Product (GDP)
 a measure of all of the goods and services
produced in the economy during a
specified time period
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12. Economic Analysis
 Recession
 two consecutive quarters of economic
contraction, or decline, in the GDP
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13. Business Cycles - Monetary
Policy and Fiscal Policy
 Monetary Policy
 the means by which the RBI influences
economic conditions by managing the
nation’s money supply
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14. Business Cycles - Monetary
Policy and Fiscal Policy
 Fiscal Policy
 Government spending, which is primarily
supported by the government’s ability to
tax individuals and businesses
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15. Business Cycles - Monetary
Policy and Fiscal Policy
 Deficit spending
 situation that occurs when the government
spends more than it collects in taxes
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16. Industry Analysis
 Defensive, or countercyclical, industries
 industries that tend to perform best when
the economy is in a contraction or
recession, but are generally the poorest
performers in expanding economies
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17. Industry Analysis
 Industry life cycle
 the various phases of an industry with
respect to its growth in sales and its
competitive conditions
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18. Industry Life Cycle
Industry
Sales
Mature
Expansion
(Growth)
Introductory
Life-Cycle Stages

19. Evaluating the Firm’s
Financial Position
 Financial statement analysis
 comparison to other similar firms
 forecast direction for future
 predict earnings and dividends
 risk evaluation
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20. Stock Valuation Techniques
 Valuation using P/E ratios
 ratio computed by dividing the current
market price per share, P0, by the earnings
per share, EPS0
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