what is fundamental analysis ?

1. Introduction
Fundamental analysis determines the intrinsic value of an asset by analyzing economic, financial,
and qualitative factors.
It is crucial for long-term investment decisions and involves evaluating financial statements, industry
trends, and macroeconomic factors.
2. Key Components of Fundamental Analysis
A. Quantitative Analysis:
- Balance Sheet (Assets, Liabilities, Shareholder's Equity)
- Income Statement (Revenue, Profit, Expenses)
- Cash Flow Statement (Operational Cash Flow)
- Financial Ratios (EPS, P/E Ratio, ROE, Debt-to-Equity)
B. Qualitative Analysis:
- Business Model & Competitive Advantage
- Management Quality & Leadership
- Market Share & Industry Trends
- Economic Indicators (GDP, Inflation, Interest Rates)
3. Fundamental Analysis vs. Technical Analysis
- Fundamental Analysis: Focuses on company financials, economy, and intrinsic value (Best for
long-term investments).
- Technical Analysis: Focuses on price trends, charts, and indicators (Best for short-term trading).
4. How to Conduct Fundamental Analysis?
- Analyze Economic & Industry Trends
- Evaluate Company?s Financials & Growth Potential
- Compare Financial Ratios with Competitors
- Determine Intrinsic Value Using Valuation Models
5. Advantages & Limitations
? Advantages:
- Identifies long-term investment opportunities.
- Provides deep insights into a company's value.
- Reduces emotional trading decisions.
? Limitations:
- Time-consuming process.
- Not suitable for short-term trading.
- Market sentiment can temporarily override fundamentals.
6. Conclusion
Fundamental analysis is a powerful tool for investors to make informed decisions.
Combining it with technical analysis can improve accuracy and risk management.
Disclaimer:
This content is for educational purposes only and does not constitute financial advice.
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