Fundamental analysis

Fundamental analysis, in accounting and finance, is the analysis of a business's financial statements (usually to analyze the business's assets, liabilities, and earnings); health;[1] competitors and markets. It also considers the overall state of the economy and factors including interest rates, production, earnings, employment, GDP, housing, manufacturing and management. There are two basic approaches that can be used: bottom up analysis and top down analysis.[2] These terms are used to distinguish such analysis from other types of investment analysis, such as quantitative and technical.

Fundamental analysis is performed on historical and present data, but with the goal of making financial forecasts. There are several possible objectives:

  • to conduct a company stock valuation and predict its probable price evolution;
  • to make a projection on its business performance;
  • to evaluate its management and make internal business decisions and/or to calculate its credit risk;
  • to find out the intrinsic value of the share.
  1. ^ "Technical Analysis vs. Fundamental Analysis". Market Technicians Association. Archived from the original on 12 March 2015. Retrieved 6 March 2015.
  2. ^ "An Introduction to Fundamental Analysis and the US Economy". InformedTrades.com. 2008-02-14. Archived from the original on 2009-07-21. Retrieved 2009-07-27.

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