Name: Mausam Surelia BATCH: BBA 2016-2019 Subject: Financial
Name: Mausam Surelia BATCH: BBA 2016-2019 Subject: Financial
Name: Mausam Surelia BATCH: BBA 2016-2019 Subject: Financial
SUBJECT: FINANCIAL
MANAGEMENT-III
INTRODUCTION
Fundamental analysis is an analytical method where
investors use to value companies based on a study of
corporate profitability and financial measures. One way
to do this is to look at the general, qualitative factors of a
company – for example what industry or sector the
company is in, who are their competitors, and if they
have a recognizable brand name. Another approach to
fundamental analysis considers tangible and
measurable quantitative factors. This means, for
instance, crunching the numbers and closely analyzing
financial statements such as the balance sheet and
income statement. When used in conjunction with other
methods, quantitative analysis can produce excellent
results and give patient investors an edge over time.
Ratio analysis is one way to make sense of these
corporate data. Looking at ratios is more involved than
simply comparing different figures from the balance
sheet, income statement and cash flow statement. It
requires relating these calculated ratios against previous
years, other companies, the industry the company is in,
and even the economy at large. Ratios can give you a
glimpse into the relationships among and between
individual values that relate to a company’s operations
and link them to how a company has performed in the
past, and how it might perform in the future. The result is
a potentially robust method of valuing the shares of a
company.
For example, a piece of data such as current assets,
which appears on the balance sheet, cannot by itself tell
us a whole lot – but when we divide current assets
by current liabilities we get important information about a
company – namely, whether it has enough money to
cover short-term debts. Then, compare one company’s
assets-to-debts with another in the same industry to
determine if one is on more stable financial footing than
the other. We can also compare that figure against the
industry average to see if a stock may outperform its
peers.
In this tutorial, we'll show you how to use ratio analysis
to analyze a company’s financial reports and go over a
number of commonly used and helpful ratios. This
tutorial intends to shed some light on how this process
can be done and, ultimately, help you to make more
informed decisions as an investor.