FUNDAMENTAL ANALYSIS

PRESENTED BYHARSH ADHIYA- 01KESHAV AGARWAL- 02NEIL GALA- 09ABHISHEK OZA- 20YATIN PRABHU-25DHAVAL SOLANKI-29

INTRODUCTION

• Fundamental Analysis involves examining the economic, financial and other qualitative and quantitative factors related to a security in order to determine its intrinsic value. • It attempts to study everything that can affect the security's value, including

macroeconomic factors (like the overall economy and industry conditions) and individually specific factors (like the financial condition and management of companies).• Fundamental analysis, which is also known as quantitative analysis, involves

delving into a company’s financial statements such as profit and loss account and balance sheet.• Fundamental analysis is the examination of the underlying forces that affect

the wellbeing of the economy, industry groups, and companies

FUNDAMENTALS: QUANTITATIVE AND QUALITATIVE

Quantitative: Capable of being measured or expressed in numerical terms. Qualitative: Related to or based on the quality or character of something, often as opposed to its size or quantity. • Quantitative fundamentals are numeric, measurable characteristics about a

business. It’s easy to see how the biggest source of quantitative data is the financial statements. You can measure revenue, profit, assets and more with great precision. • Turning to qualitative fundamentals, these are the less tangible factors

surrounding a business - things such as the quality of a company’s board members and key executives, its brand-name recognition, patents or proprietary technology.

TWO APPROACHES OF FUNDAMENTAL ANALYSIS

ECONOMY ANALYSIS

• Macroeconomics is the study of the behavior of the economy as a whole. Macro economy is very complicated and there are many factors that influence it. These factors are analyzed with various economic indicators that tell us about the overall health of the economy.• Consumers want to know how easy it will be to find work, how much it

will cost to buy goods and services in the market.• Businesses use macroeconomic analysis to determine whether expanding

production will be welcomed by the market.• Governments turn to the macro economy when budgeting spending,

creating taxes, deciding on interest rates and making policy decisions.

CONTINUED

Economy analysis broadly focuses on:National Output: GDP

Unemployment

Inflation

INDUSTRY ANALYSIS

• Industry analysis is an essential responsibility for an equity research analyst. As an equity research analyst, you need to analyze a particular industry, see its past trends, demand-supply mechanics and future outlook. • Industry analysis is a tool that facilitates a company's understanding of its

position relative to other companies that produce similar products or services.• The industry analysis report sheds light on the economic health of the

company, underlining the understanding whether it will be beneficial for the stakeholders to invest in such a company.

CONTINUED

Industry analysis broadly focuses on:Review available reports

Approach the correct industry

Demand & supply scenario

Competitive scenario

COMPANY ANALYSIS

• Company analysis refers to the process of evaluating a company's profitability, profile and products or services. It is also known as “fundamental analysis”.• A company analysis incorporates basic info about the company, like the

mission statement and apparition and the goals and values. • During the process of company analysis, an investor also considers the

company’s history, focusing on events which have contributed in shaping the company. • A company analysis looks into the goods and services proffered by the

company.

CONTINUED

Company analysis broadly focuses on:Balance Sheet

Current Assets and Liabilities

The Current Ratio

Financial Position: Book Value

FUNDAMENTAL ANALYSIS: FINANCIAL RATIO

Profitability ratiosLiquidity ratiosActivity ratios (Efficiency Ratios)Debt ratios (leveraging ratios)Market ratiosCapital budgeting ratios

CONCLUSIONS

Fundamental analysis can be valuable, but it should be approached with caution. If you are reading research written by a sell-side analyst, it is important to be familiar with the analyst behind the report. We all have personal biases, and every analyst has some sort of bias. There is nothing wrong with this, and the research can still be of great value. Learn what the ratings mean and the track record of an analyst before jumping off the deep end. Corporate statements and press releases offer good information, but they should be read with a healthy degree of skepticism to separate the facts from the spin. Investors should become skilled readers to weed out the important information and ignore the hype.

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