A new investor is interested in the stock market, but he does not know how to invest in the stock market. So, to make the right investment in a company, it is very important for you to know the What is fundamental analysis? of the company.
What is fundamental analysis?
Fundamental analysis means finding out the intrinsic value of any company share. Intrinsic value is called as true value. If you buy a company share, do you know whether you are buying this share at true value or not, the share you have bought is more expensive than its price. Fundamental analysis helps you a lot in getting this information about any company.
Types of fundamental analysis?
Fundamental analysis is done in two ways.
Qualitative Analysis
Qualitative analysis includes the decisions of the company management, the brand value of the company, the performance of the company, and other things.
Quantitative Analysis
In quantitative analysis, the numbers of the company financial statements are examined, and the real price of the shares is analyzed.
How to do fundamental analysis?
To do fundamental analysis, you have to read the financial statement of the company, after reading which you can do fundamental analysis.
Balance Sheet
In the balance sheet of any company, you get information about the current assets, liabilities and shareholder equity. In a way, you get information about the financial statement of the company. For example, information about how much money the company is earning, how much money it is spending and how much money the company has for its future business plan is available in the balance sheet.
Income Statement
In the income statement you get information about the profit and loss of the company.
Cash Flow Statement
In the cash flow statement, you get information about the cash coming in and going out of the company.
Fundamental Analysis Ratio
Fundamental analysis ratios are the most commonly used tools.
EPS Ratio
EPS ratio is a very popular ratio, it tells you about the profit of the company on each share of the company. The formula to calculate EPS ratio is as follows. You can easily calculate EPS ratio using this formula.
EPS RATIO = (Net Income-Preferred Share Dividend) / Total No. of share.
PB Ratio
Just as the balance sheet gives you information about the book value of a company, you can get information about the valuation of a company by comparing the share price of the company based on this book value. To calculate PB ratio, share price is divided by book value.
PB RATIO = Share Price / Book Value of Company.
ROE Ratio
You can easily invest in a company by using the ROE ratio. To calculate the ROE ratio, net income is divided by total equity.
ROE RATIO = Net Income / Total Equity.
Debt to Equity Ratio
Debt to equity ratio is a very important ratio because this ratio tells you how much debt the company. Total debt is divided by shareholder equity to calculate the debt-to-equity ratio.
Debt to Equity Ratio = Total Debt / Shareholder Equity.
Disclaimer: The information written in this article is for educational purposes only. If you want to invest in the stock market, you should learn about the stock market yourself or take advice from a financial advisor and certified expert. The stock market is subject to risk. Before making any investment, you must take expert advice.
Conclusion
In this article, we have explained in detail to all of you friends and regular readers what is fundamental analysis? And we have also given you other information related to fundamental analysis. Friends, in this article, we have given information about fundamental analysis, we hope that you liked this information very much. So please like, share and comment on this article.
FAQ
1. What is fundamental analysis?
You can evaluate whether a company is good or bad through fundamental analysis. A good company shows some good results, and a bad company shows some bad results.
2. How to do fundamental analysis?
To do fundamental analysis, the management of any company, the economic condition of the company, the current price of the share, the future plan of the company, and the business model of the company are studied.
3. How many types of fundamental analysis are done?
Qualitative analysis includes the decision of the company management, the performance of the company, the brand value of the company, the future plan of the company and other things. In quantitative analysis, the financial statements of the company and the number reports of the company are examined.
