Guide to Analysing Companies

Quantitative analysis
An analysis that concentrates on measurable things such as the
cost of a company’s capital, its projected sales and likely
profits. Usually combined with, but to be distinguished from,
qualitative analysis, to arrive at a rounded judgment.
Quotation
What a company gets when its shares become quoted on a
recognised stock exchange. To get a quotation it has to meet
certain standards laid down by the exchange. It has to maintain
prescribed levels of disclosure to its shareholders and the public
in general. In return, the exchange helps to make the company’s
shares marketable by providing a price and a means through
which buyers and sellers can get together.
247
03 Essential Finance 10/11/06 2:22 PM Page 247

---

Rr
Ramp
To push up the price of a share artificially.
Random walk
A forecasting theory based on the premise that the past never
repeats itself. The hypothesis is that all technical analysis
and predictions of future price movements based on past be-
haviour are worthless. The random walk theory was first devel-
oped in 1900 by Louis Bachelier, a French mathematician, and
was popularised in the 1960s. Its most ardent supporters claim
that future movements in markets are no more predictable than
the random walk of a drunken man.
Rate of interest
The cost of money over time. The difference between the cost
of interest paid by banks to their depositors and the rate of in-
terest that borrowers pay to banks for their loans is called
the banks’ turn. Rates of interest are influenced by three main
factors.
1 The rate of inflation, which acts as a floor. Only in excep-
tional circumstances will a key interest rate fall below a
country’s rate of inflation.