Fundamental analysis of a business involves analyzing its financial statements and health, its management and competitive advantages, and its competitors and markets. When applied to futures and forex, it focuses on the overall state of the economy, interest rates, production, earnings, and management. When analyzing a stock, futures contract, or currency using fundamental analysis there are two basic approaches one can use; bottom up analysis and top down analysis. The term is used to distinguish such analysis from other types of investment analysis, such as quantitative analysis and technical analysis.
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,
- to calculate its credit risk.
Read more about Fundamental Analysis: Two Analytical Models, Use By Different Portfolio Styles, Top-down and Bottom-up, Procedures, Criticisms
Famous quotes containing the words fundamental and/or analysis:
“It’s important to remember that children who are facing a frightening situation have three fundamental concerns: Am I safe? Are you, the people who care for me, safe? How will this affect my daily life?”
—Lawrence Kutner (20th century)
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—Henry Brooks Adams (1838–1918)