The Very Basic of Fundamental Analysis

³ Fundamental Analysis

³ The Very Basics

³ Fundamentals: Quantitative and Qualitative

³ Quantitative Meets Qualitative

³ The Concept of Intrinsic Value

³ Criticisms of Fundamental Analysis

³ Business Model

³ Competitive Advantage

³ Management

³ Conference Calls & Management Discussion and Analysis (MD&A)

³ Ownership and Insider Sales & Past Performance

³ Corporate Governance

³ Financial and Information Transparency & Stakeholder Rights & Structure of the Board of Directors

³ Customers & Market Share

³ Industry Growth & Competition

³ Regulation


The Very Basics

When talking about stocks, fundamental analysis is a technique that attempts to determine a security’s value by focusing on underlying factors that affect a company's actual business and its future prospects. On a broader scope, you can perform fundamental analysis on industries or the economy as a whole. The term simply refers to the analysis of the economic well-being of a financial entity as opposed to only its price movements

Fundamental analysis serves to answer questions, such as:

Is the company’s revenue growing?

Is it actually making a profit?

Is it in a strong-enough position to beat out its competitors in the future?

Is it able to repay its debts?

Is management trying to "cook the books"?

Of course, these are very involved questions, and there are literally hundreds of others you might have about a company. It all really boils down to one question: Is the company’s stock a good investment? Think of fundamental analysis as a toolbox to help you answer this question.

Note: The term fundamental analysis is used most often in the context of stocks, but you can perform fundamental analysis on any security, from a bond to a derivative. As long as you look at the economic fundamentals, you are doing fundamental analysis. For the purpose of this tutorial, fundamental analysis always is referred to in the context of stocks.


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