- This topic has 0 replies, 1 voice, and was last updated 4 years ago by
.
-
Posts
-
The scope of Fundamental Analysis is vast and it covers a lot of elements. Some of the elements are discussed below as you cover them in your course-
1. Working Capital Analysis
One of the most important components of Fundamental Analysis is the Working Capital Analysis. In simple words, Working Capital Analysis reflects whether there are sufficient current assets for the current liabilities that a company has.
In other words, it measures the liquidity of the company. The short-term ability to cover the short-term liabilities dictates how well-positioned the company is in the market.
Working Capital can be calculated by adding up the cash in hand, the accounts receivable and the inventory in hand, and subtracting the total from accounts payable and other accrued expenses.
2. Operating profit margin
The operating Profit margin is the ratio of Operating Income, divided by the total revenue of the firm. The ratio measures the profitability of the firm.
3. Free Cash Flow Analysis
Free Cash flow analysis measures the profitability of the firm after excluding the non-cash expenses of the income statement and including spending on equipment as well as changes in the Working Capital from the Balance Sheet. Free Cash Flow(FCF) Analysis reflects the overall value of a company and may indicate the health of its trends.
4. Ratio Analysis
These are simple ratio analysis tools as mentioned in the course to picture the overall functioning of a company and provide a reflection of where its valuation might be in the future.
Learn well and happy investing!
You must be logged in to reply to this topic. Login here