Investing in stocks and analyzing them are easier. What’s more, they provide handsome returns, too, if picked well.
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The fundamental analysis determines the health and performance of an underlying company by looking at key numbers and economic indicators. The purpose is to identify fundamentally strong companies or industries and fundamentally weak companies or industries. Investors go long (purchasing with the expectation that the stock will rise in value) on the companies that are strong, and short (selling shares that you believe will drop in value with the expectation of repurchasing when at a lower price) the companies that are weak. This method of security analysis is considered to be the opposite of technical Analysis which forecasts the direction of prices through the analysis of historical market data, such as price and volume.
Covering 31+ Topics + 50+ Case Studies Check syllabus
The Basics of Fundamental Analysis
Fundamental analysis uses real, public data to evaluate a security's value. Although most analysts use fundamental analysis to value stocks, this method of valuation can be used for just about any type of security.
Here's what you will learn
1. An Introduction
1.1 What is the fundamental analysis?
1.2 Why is fundamental analysis relevant for investing?
1.3 Efficient Market Hypothesis (EMH)
1.4 Arguments against EMH
1.5 So, does fundamental analysis work?
1.6 Steps in Fundamental Analysis
2. Brushing Up the Basics
2.1 Concept of “Time Value of Money”
2.2 Interest Rates and Discount Factors
2.3 Opportunity Cost
2.4 Risk-free Rate
2.5 Equity Risk Premium
2.6 The Beta
2.7 Risk-Adjusted Return (Sharpe Ratio).
3. Understanding Financial Markets
3.1 Where can one find financial statements?
3.2 The Director’s Report
3.3 The Auditor’s Report
3.4 Financial Statements
3.5 Balance Sheet
3.6 Income Statement
3.7 Schedules and Notes to the Accounts
3.8 Cash Flow Statement
3.9 Financial Statement Analysis and Forensic Accounting
3.10 Comparative and Common-size Financial Statements
3.11 Financial Ratios
3.12 Du-Pont Analysis
3.13 Cash Conversion Cycle
3.14 The Satyam Case and Need for Forensic Accounting
4. VALUATION METHODOLOGIES
4.1 Top-Down Valuation (EIC Analysis)
4.2 Economy
4.3 Industry
4.4 Company