Company Analysis

PRESENTED BY :
BISHNU KUMAR SINGH
REGD NO : 15331E0012

Introduction
Company analysis is the final stage of fundamental

analysis.
Company analysis deals with the estimation of return and
risk of individual shares.
Investor has to decide the company in which he should
invest his money, company analysis provides the answer
to this question.

Financial Statements
The financial statements published by a company

periodically help us to assess the profitability & the

financial health of the company.
The two basic financial statements provided by a
company are:
BALANCE SHEET &
PROFIT AND LOSS ACCOUNT.

ANALYSIS OF FINANCIAL STATEMENTS

Financial Ratios are most extensively used for the

purpose of analysing the financial statements

Four groups of ratios may be used for analysing the
performance of a company
Liquidity ratio
Leverage ratio
Profitability ratio
Efficiency ratio

Other Variables
The future prospects of a company would also depend
upon a number of other variables. Some of which are given
below
Companys market share
Capacity utilization
Modernization & expansion plans
Order book position
Availability of raw materials

Contd
The most important variable affecting the future prospects

of the company is perhaps the quality of its management.

The future of a company depends on the quality &
competence of its management to a very great extent

Assessment of Risk
Company analysis involves not only an estimation of

future returns, but also an assessment of the variability in

returns called risk
The variability in returns arises primarily because of
variability in sales
The sensitivity of profits to change in the level of sales is
measured by a ratio called degree of total leverage

Degree of total leverage

Degree of total leverage is equals to the product of degree

of operating leverage and degree of financial leverage

DOL = contribution
EBIT
DFL = EBIT
PBT

CONCLUSION
The investment decision is ultimately a decision to
invest in the shares of one or more specific companies.
Company analysis deals with analysis of various factors
affecting the performance of the companies so as to forecast
the future earnings of a company as also its variability better
known as risk.