This document discusses various aspects of fundamental analysis including: 1. Fundamental analysis examines economic and financial factors that may affect a security's value, such as macroeconomic conditions and company management effectiveness. 2. Fundamental factors can be quantitative (numbers-based like financial statements) or qualitative (less tangible like management quality). 3. Economic analysis studies how key economic indicators like GDP, inflation, and interest rates impact an organization or industry. 4. Industry analysis identifies growing industries and evaluates industry life cycle stages from innovation to decline. 5. Company analysis examines individual companies' non-financial factors like history and technology as well as financial metrics like equity, sales, profits, and ratios.

1. FUNDAMENTAL ANALYSIS
Ramya B
Assistant Professor
B.com(PA)
Sri Ramakrishna College of Arts and Science
Coimbatore - 641 006
Tamil Nadu, India
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2. Fundamental Analysis
• Fundamental analysis (FA) is a method of measuring a
security's inbuilt value by examining related economic and
financial factors.
• Fundamental analysts study anything that can affect the
security's value, from macroeconomic factors such as the
state of the economy and industry conditions to
microeconomic factors like the effectiveness of the
company's management.
• Fundamental analysis is the study of how external and
internal factors affect the price of a company’s securities.

3. Quantitative and Qualitative Fundamental
Analysis
• The various fundamental factors can be grouped into two categories: quantitative and qualitative. The
financial meaning of these terms isn't much different from their standard definitions. Here is how a
dictionary defines the terms:
• Quantitative – "related to information that can be shown in numbers and amounts."
• Qualitative – "relating to the nature or standard of something, rather than to its quantity."

4. • In this context, quantitative fundamentals are hard numbers. They are the measurable characteristics of a
business. That's why the biggest source of quantitative data is financial statements. Revenue, profit,
assets, and more can be measured with great precision.
• The qualitative fundamentals are less tangible. They might include the quality of a company's key
executives, its brand-name recognition, patents, and proprietary technology.

7. ECONOMIC ANALYSIS
• Definition: An economic analysis is a process followed by experts to
understand how key economic factors affect the functioning of an
organization, industry, region or any other particular population
group, with the purpose of making wiser decisions for the future. It is
a broader term that can mean simple and concise or sophisticated
and complex identification, study and projection of economic
variables.

8. Economic Analysis is a study of the
following factors.
1. Gross Domestic Product (GDP): GDP is the total value of
goods and services produced in an economy.
2. Inflation: High inflation reduces investor’s purchasing
power. This reduces the overall demand in an economy. Low
demand means less revenue. When companies earn less it
directly affects investor sentiments.

9. • 3. Interest rates: When interest rates are high, businesses are forced to borrow
money at high rates. This increases the cost of capital reducing company’s
profitability.
• 4. Economic & Political Stability: A stable political environment is important
for businesses. Companies can work in the long term only when there is stable
political climate in the country. For example: Investors prefer investing in
companies based in USA, UK than politically unstable countries like Syria or
Iran.

10. INDUSTRY ANALYSIS
• The second face of fundamental analysis consists of a detailed
analysis of a specific industry; its characteristics, its past record, its
future prospects.
• The purpose of industry analysis is to identify those industries which
are likely grow in the future and to invest in equity share of
companies selected from such industries.
• Industry level analysis will help investors to select the industries on
innovation, technology, cyclical blues, FERA or FMCG companies of
consumer goods producers and all high demand oriented group of
industries.

11. All industries have various stages of growth: -
Stage1: Innovation, technological development, initial phase
and cyclic phase. (pioneering stage)
Stage2: Growth Phase. (expansion stage)
Stage3: Competitive or Maturity Phase. (stagnation stage)
Stage4 : Declining Phase. (declining stage)

12. COMPANY ANALYSIS
• Investors many times find that though a particular industry may be
doing very well, certain companies in that industry may not be in
good shape.
• On the other hand it is quite likely that one or two companies would
do well in a slump industry. Hence selecting individual companies for
investment in a given industry is equally important. There are two
major components of industry analysis.

13. a) Non financial aspects:- The scope of the non financial aspects covers the
study about the history and track record of the promoters, relevant technology,
brand image of products, industrial relations, industry reputation in the
market, infrastructure, market share of the company likewise.
b) Financial Analysis:- Important fundamental criteria are covered in this
column. There are some important fundamental factors one has to know in this
analysis. Equity , sales, book vale, operating profit, gross profit, net profit,
earning per share, price earning ratio, dividend, are some of the above factors to
study.