What is a Fundamental Analysis?
A fundamental analysis is all about getting an understanding of a company, the health of its business and its future projection. It includes reading and analyzing yearly reports and financial statements to get an understanding of the company’s comparative advantages, competitors and its market environment.
Fundamental analysis is a stock estimation technique that uses financial and economic analysis to forecast the movement of stock prices.
The fundamental information that is analyzed can comprise a company’s financial reports, and non- financial information such as estimates of the growth of demand for products sold by the company, industry comparisons, and economy-wide changes, changes in government policies etc..
What information do you need to perform fundamental analysis?
- Reading a balance sheet: Assets
- Reading a balance sheet: Liabilities
- Reading a balance sheet: Equity
- Reading an income statement: Revenues and Costs
- Reading an income statement: Margins and Earnings
- Reading an income statement: Earning Ratios
- Reading a cash flow statement: The Big Picture
- Reading a cash flow statement: Operating Cash Flows
- Reading a Cash Flow Statement: Investing and Financing Cash Flows