Fundamental Analysis Essay

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■ Fundamental Analysis:

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"?

The term
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It could be days or years

By focusing on a particular business, an investor can estimate the intrinsic value of a firm and thus find opportunities where he or she can buy at a discount. If all goes well, the investment will pay off over time as the market catches up to the fundamentals

Fundamental Analysis involves in three steps:

1. Company Analysis
2. Industry Analysis
3. Economy Analysis

◙ The Company Analysis:

A company's financial statements, we're going to take a look at some of the qualitative aspects of a company.

Fundamental analysis seeks to determine the intrinsic value of a company's stock. But since qualitative factors, by definition, represent aspects of a company's business that are difficult or impossible to quantify, incorporating that kind of information into a pricing evaluation can be quite difficult. On the flip side, as we've demonstrated, we can't ignore the less tangible characteristics of a company

In this section we are going to highlight some of the company-specific qualitative factors that you should be aware of

●Business Model

Even before an investor looks at a company's financial statements or does any research, one of the most important questions that should be asked is: What exactly does the company do? This is referred to as a company's business model – it's how a company makes money.

Sometimes business models are easy to understand. Take McDonalds, for instance,

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