Fundamental Market Analysis
Fundamental analysis involves getting data about a company's stocks or a
particular sector in the stock market, via financial records, company assets,
economic reports, and market share. Analysts and investors can conduct
fundamental analysis via the metrics on a corporation's financial statement.
These metrics
include cash flow statements, balance sheet statements,
footnotes, and income statements.
Most times, you can get a company's
financial statement through a 10-k report in the database. In addition to this,
the SEC's EDGAR is a good place to get the financial statement of the
company you are interested in.
With the financial statement, you can deduce
the
revenues, expenses, and profits a company has made.
What's more? By looking
at the financial statement, you will have a
measure of a company's growth trajectory, leverage, liquidity, and solvency.
Analysts utilize different ratios to make an accurate prediction about stocks.
For example, the quick ratio and current ratio are useful in determining if a
company will be able to pay its short-term liabilities with the current asset.
If the current ratio is less than 1, the company is
in poor financial health and
may not be able to recover from its short-term debt. Here's another
example: a stock analyst can use the debt ratio to measure the current level
of debt taken on by the company. If the debt ratio is above 1, it means the
company has more debt than assets and it’s only a matter of time before it
goes under.