FUNDAMENTAL ANALYSIS

What is it?  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 .

Qualitative factors         Business Model Competitive advantage Management Corporate governance Customers Market share Industry growth Regulation .

Financial statements      Balance Sheet Income statement Cashflow statement Auditors report Management Discussion and Analysis .

important margins . Overheads. Depreciation.Income statement  Revenue and its quality  Major expenses – COGS. Interest  Profit = revenue – expenses.

Balance Sheet  Paid-up capital and retained earnings  Composition of assets – fixed and current  Composition of liabilities – long-term and current  Off balance sheet items .

Cashflow statement  Based on actual cash exchanged. not on accrual  CF from operating activities  CF from investing activities  CF from financing activities  Free cash flow to firm (FCFF)  Free cash flow to equity (FCFE) .

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