{"id":1204,"date":"2021-10-15T18:40:55","date_gmt":"2021-10-15T18:40:55","guid":{"rendered":"https:\/\/knowledgeguide.in\/?p=1204"},"modified":"2024-08-16T16:20:48","modified_gmt":"2024-08-16T16:20:48","slug":"what-is-fundamental-analysis-in-the-share-market-%e0%ae%aa%e0%ae%99%e0%af%8d%e0%ae%95%e0%af%81%e0%ae%9a%e0%af%8d-%e0%ae%9a%e0%ae%a8%e0%af%8d%e0%ae%a4%e0%af%88%e0%ae%af%e0%ae%bf%e0%ae%b2%e0%af%8d","status":"publish","type":"post","link":"https:\/\/knowledgeguide.in\/?p=1204","title":{"rendered":"What is fundamental analysis in the share market?"},"content":{"rendered":"\n<p><strong>Fundamental Analysis<\/strong> involves examining economic and financial factors.<\/p>\n\n\n\n<p>Here are some aspects you need to understand about the company you wish to invest in:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Stock Screening<\/strong>: Important factors to consider when selecting a suitable stock for investment.<\/li>\n\n\n\n<li><strong>Company Structure<\/strong>: Understanding the company&#8217;s organizational setup.<\/li>\n\n\n\n<li><strong>Competitors<\/strong>: Identifying the company&#8217;s competitors.<\/li>\n\n\n\n<li><strong>Intrinsic Value of Stock<\/strong>: Determining the true value of the company&#8217;s stock.<\/li>\n\n\n\n<li><strong>Reading Financial Statements<\/strong>: Analyzing the company\u2019s financial statements.<\/li>\n\n\n\n<li><strong>Future Opportunities<\/strong>: Analyzing future financial reports.<\/li>\n<\/ul>\n\n\n\n<p><strong>Key Factors for Analysis:<\/strong><\/p>\n\n\n\n<p>A) <strong>Financial Factors<\/strong>: (Financial Report)<\/p>\n\n\n\n<p>B) <strong>Economic Factors<\/strong>: (Economic Report)<\/p>\n\n\n\n<p><strong>Considerations:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Profit and Loss Statements<\/li>\n\n\n\n<li>Revenue<\/li>\n\n\n\n<li>Operations<\/li>\n\n\n\n<li>Debts<\/li>\n\n\n\n<li>Cash Reserves<\/li>\n\n\n\n<li>Competencies<\/li>\n<\/ul>\n\n\n\n<p><strong>Fundamental Analysis<\/strong> involves understanding the following aspects:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Liquidity<\/strong><\/li>\n\n\n\n<li><strong>Profitability<\/strong><\/li>\n\n\n\n<li><strong>Price of the Stock<\/strong><\/li>\n\n\n\n<li><strong>Leverage<\/strong><\/li>\n<\/ul>\n\n\n\n<p><strong>Liquidity:<\/strong><\/p>\n\n\n\n<p>The term <strong>liquidity<\/strong> refers to how quickly and easily a stock can be bought or sold in the market. It indicates the ease with which a stock can be converted into cash without significantly impacting its market price. Cash is considered the most liquid asset.<\/p>\n\n\n\n<p>At the same time, stable stocks are less liquid . (buy\/sell tradinding (Liquidity) <\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"194\" src=\"https:\/\/knowledgeguide.in\/wp-content\/uploads\/2021\/10\/Fundamental-1024x194.png\" alt=\"\" class=\"wp-image-1213\" srcset=\"https:\/\/knowledgeguide.in\/wp-content\/uploads\/2021\/10\/Fundamental-1024x194.png 1024w, https:\/\/knowledgeguide.in\/wp-content\/uploads\/2021\/10\/Fundamental-300x57.png 300w, https:\/\/knowledgeguide.in\/wp-content\/uploads\/2021\/10\/Fundamental-768x145.png 768w, https:\/\/knowledgeguide.in\/wp-content\/uploads\/2021\/10\/Fundamental-1536x291.png 1536w, https:\/\/knowledgeguide.in\/wp-content\/uploads\/2021\/10\/Fundamental.png 1642w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><figcaption class=\"wp-element-caption\">Source:<\/figcaption><\/figure>\n\n\n\n<p><strong>Two types of Ratio:<\/strong><\/p>\n\n\n\n<ol style=\"list-style-type:upper-roman\" class=\"wp-block-list\">\n<li>Current Ratio<\/li>\n\n\n\n<li>Quick Ratio<\/li>\n<\/ol>\n\n\n\n<p><strong>Current ratio:<\/strong><\/p>\n\n\n\n<p>=Current Assets\/Current Liabilities<\/p>\n\n\n\n<p><strong>Quick Ratio:<\/strong><br>=Current Assets-Inventory \/ Current Liabilities<\/p>\n\n\n\n<p>Good Range for selection= &gt;1 (Greaterthan1)<\/p>\n\n\n\n<p>Good Selection Range more than 1 %.<\/p>\n\n\n\n<p><strong>EPS (Earnings Per Share):<\/strong><\/p>\n\n\n\n<p>Earnings Per Share (EPS) is a statistic that describes the profit allocated to each outstanding share of a company. It is calculated on a quarterly or annual basis. EPS is determined by dividing a company&#8217;s net income for the period by the number of outstanding shares.<\/p>\n\n\n\n<p>EPS serves as a fundamental measure of a company&#8217;s profitability and helps investors gauge whether a company is a good investment.<\/p>\n\n\n\n<p>EPS = Net Income for the Period \/ Number of Outstanding Equity Shares<\/p>\n\n\n\n<p>For example:<br>EPS = 200 Crores \/ 5 Crores<br>EPS = Rs. 40<\/p>\n\n\n\n<p><strong>TTM PE (Price to Earnings):<\/strong><\/p>\n\n\n\n<p>The Price-to-Earnings (P\/E) ratio links a company&#8217;s stock price to its earnings per share. A high P\/E ratio may indicate that a company&#8217;s stock is overvalued or that investors expect high growth rates in the future.<\/p>\n\n\n\n<p>P\/E Ratio = Current Market Price of a Share \/ Earnings per Share<\/p>\n\n\n\n<p>The market average P\/E ratio currently ranges from 20 to 25.<\/p>\n\n\n\n<p><strong>Leverage:<\/strong><\/p>\n\n\n\n<p>Leverage involves using borrowed funds to increase the potential return on an investment. It is a strategy that amplifies the effect of debt on the company&#8217;s operations.<\/p>\n\n\n\n<p>Leverage is measured by the Debt-to-Equity Ratio:<\/p>\n\n\n\n<p>Debt-to-Equity Ratio = Debt \/ Equity<\/p>\n\n\n\n<p>Good Selection Range = &lt;1 (Less than 1)<\/p>\n\n\n\n<p><strong>Profitability:<\/strong><\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Return on Equity (ROE):<\/strong> ROE measures how effectively a company uses shareholders&#8217; equity to generate profit. ROE = Net Income (Annual) \/ Shareholders&#8217; Equity Good Selection Range = 15% to 20%<\/li>\n\n\n\n<li><strong>Return on Assets (ROA):<\/strong> ROA indicates how efficiently a company uses its assets to generate operating income. ROA = Operating Income \/ Total Assets Good Selection Range = More than 5%<\/li>\n\n\n\n<li><strong>EBITDA:<\/strong> EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It measures a company&#8217;s overall financial performance. EBITDA = Net Income + Taxes + Interest Expenses + Depreciation &amp; Amortization A good selection range for EBITDA should be increasing annually.<\/li>\n\n\n\n<li><strong>Dividend Yield:<\/strong> Dividend Yield measures the return on investment based on dividends received. Dividend Yield = Dividend per Share \/ Stock Price<\/li>\n<\/ol>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Fundamental Analysis involves examining economic and financial factors. Here are some aspects you need to understand about the company you wish to invest in: Key Factors for Analysis: A) Financial Factors: (Financial Report) B) Economic Factors: (Economic Report) Considerations: Fundamental Analysis involves understanding the following aspects: Liquidity: The term liquidity refers to how quickly and easily a stock can be bought or sold in the market. It indicates the ease with which a stock can be converted into cash without significantly impacting its market price. Cash is considered the most liquid asset. At the same time, stable stocks are less <\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1204","post","type-post","status-publish","format-standard","hentry","category-share-market"],"_links":{"self":[{"href":"https:\/\/knowledgeguide.in\/index.php?rest_route=\/wp\/v2\/posts\/1204","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/knowledgeguide.in\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/knowledgeguide.in\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/knowledgeguide.in\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/knowledgeguide.in\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1204"}],"version-history":[{"count":5,"href":"https:\/\/knowledgeguide.in\/index.php?rest_route=\/wp\/v2\/posts\/1204\/revisions"}],"predecessor-version":[{"id":1426,"href":"https:\/\/knowledgeguide.in\/index.php?rest_route=\/wp\/v2\/posts\/1204\/revisions\/1426"}],"wp:attachment":[{"href":"https:\/\/knowledgeguide.in\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1204"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/knowledgeguide.in\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1204"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/knowledgeguide.in\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1204"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}